Looking at the financials, Siemens trades for just nine times earnings and sports a 4% dividend — a payout that has a history of growing. The company also has virtually no debt (its $19 billion in cash and equivalents are roughly equal to its long-term debts), meaning it has the financial strength to survive whatever the financial crisis throws at it.
Crisis or no crisis, Siemens belongs in your portfolio.
Next on the list is another German company — Daimler AG (PINK:DDAIF), the maker of the iconic Mercedes-Benz, among other luxury brands.
Whenever I think of Daimler, I will always think of the “Indiana Jones of Finance,” Jim Rogers. In a road trip across six continents chronicled in his book Adventure Capitalist, Mercedes was Rogers’ vehicle of choice. Why? Because “every dictator and mafioso in the world drives a Mercedes … even in countries with no roads to speak of.”
Rogers wasn’t joking about that. Mercedes is the premier global luxury automobile. And it is a fantastic way to get “backdoor” exposure to emerging markets. China already is the world’s largest consumer of the high-end S-Class, and China accounted for 18% of all Mercedes cars sold this past quarter. In trucks, the numbers are even better. More than half of Daimler truck sales come from Asia and Latin America.
Investors fret that 45% of Daimler’s auto sales come from western Europe. This does not particularly worry me. Daimler’s high-income customers are less at risk of financial distress than the average European. But even if the atmosphere of austerity makes a dent in European sales, the stock price offers more than a sufficient margin of safety. DDAIF shares trade for less than seven times earnings and yield nearly 6%.
But that doesn’t tell the full story about how cheap this company is. Daimler trades for just 0.33 times sales. The company also has $15.33 per share in cash; at the current stock price of $45, this means that a third of the company’s value is just its cash sitting in the bank.
Companies this cheap aren’t supposed to exist. At current prices, Daimler is simply too cheap to pass up.
Let’s now head south to the Mediterranean and crisis-wracked Spain. The land of bullfights and flamenco has one of the highest unemployment rates in the world and a property market that still has a lot further to fall. Of all the countries in Europe, I expect Spain to take the longest to recover.
Of course, this doesn’t particularly matter to Spanish telecom giant Telefonica (NYSE:TEF).
It’s not all that accurate to call Telefonica a “Spanish” telecom company. Spain only accounts for about a third of revenues. Fully 47% of revenues come from the fast-growing emerging markets of Latin America.
So, in essence, Telefonica is an emerging-markets growth dynamo masquerading as a slow-growth European blue chip.
The stock also happens to be insanely cheap. It trades for just five times earnings and yields an astonishing 12% in dividends. If the share price never moves a cent, you still can enjoy what are likely to be market-beating returns on the dividends alone. And all of this from a company that provides what has become an essential utility — mobile telecom service.