by Tom Taulli | August 22, 2012 7:30 am
It seems kind of crazy to invest in Europe right now. After all, much of the news has been bad — for the past two years! Oh, and it looks like the continent will be suffering under long-term policies of austerity.
Then again, hasn’t all this been factored into the stock prices? This is the belief of Christian Mueller-Glissmann and Peter Oppenheimer, equity strategists for Goldman Sachs (NYSE:GS). In fact, they say the best trade now is to buy Europe and sell the U.S. These analysts think the sovereign debt issues have been managed fairly well and that valuations of European companies are dirt cheap.
One way to bet on this prognosis is through mutual funds that focus in various ways on Europe. Let’s take a look at five:
Invesco is one of the world’s best managers of global funds. And it’s European Growth (MUTF:AEDAX) fund is a top-notch offering. For 2012, the fund is up 12.54%. Over the past three years, the average annual return is 12.11%. In other words, the portfolio managers — Clas Olsson and Jason Holzer — know how to handle market volatility.
Then again, the main focus is on deep fundamental analysis, which helps them to avoid the risky companies, especially those in the finical sector.
AEDAX also has a hefty dividend yield, coming in at 3.1%.
If you want to take on more risk, check out the Royce European Smaller Companies (MUTF:RISCX) fund. The parent company has decades experience in the small-cap market — and this has benefited its European ambitions. As for 2012, RISCX is up a respectable 6.35%.
The fund targets companies with market caps no bigger than $5 billion. RISCX portfolio manager David Nadel has an interesting strategy: He looks for companies in Europe that have strong footprints in overseas markets, especially in emerging markets. This means he can find cheap companies that are growing at hefty rates.
Investing in an index fund can be an effective way to get exposure to Europe. And a top choice is the Vanguard European Stock Index (MUTF:VEURX) fund, which tracks 400 stocks. A big part of the holdings include mega-caps like Royal Dutch Shell (NYSE:RDS-A), HSBC Holdings (NYSE:HBC) and Vodafone Group (NYSE:VOD). Because of this, the dividend yield is an attractive 4.29%.
The fees are also fairly low. Consider that the expense ratio is only 0.26%.
What about the performance? For 2011, VEURX is up nearly 9%.
While the breakup of the Soviet Union happened over 20 years ago, Eastern Europe is still in the early stages of growth. The region has tremendous natural resources, such as oil, and it has continued focusing on capitalist approaches. There has even been growth in the tech space.
To participate, you might want to consider the U.S. Global Investors Eastern European (MUTF:EUROX) fund, which focuses primarily on companies in Russia, the Czech Republic, Hungary and Poland.
In 2012, the fund has been on a tear, up about 11%.
The Nordic countries are often overlooked — or even forgotten. But the region offers lots of opportunities. For the most part, the eurozone debt crisis or the slowdown in China have had little impact here. Unemployment has stayed fairly stable, and housing prices have been robust.
To benefit from these trends, you can invest in the Fidelity Nordic (MUTF:FNORX) fund. It targets about 20 to 30 companies with positive growth profiles. This has helped to avoid drags like Nokia (NYSE:NOK).
For 2012, FNORX has been a standout performer, with a return of about 13%.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.
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