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5 Top European Stocks to Buy Now

Use this crisis — and these valuations — to your advantage

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Continuing the theme of stable and boring (and profitable), let’s now take a look at Anglo-Dutch consumer products giant Unilever (NYSE:UL). Food and soap. That is pretty much the extent of Unilever’s business. The company sells popular food and dessert brands like Hellman’s, Wish-Bone, Ragu, Lipton and Ben & Jerry’s, as well as personal care brands Suave, Dove, Axe, and Vaseline, among others.

Why would I be interested in a company this boring? First, the obvious. Demand for its products is stable.

My real reason for liking Unilever is that more than half of its sales already come from emerging markets. Management expects emerging markets to make up 70% to 75% of sales by the end of this decade. Like Telefonica, Unilever is an emerging-markets growth story trapped in a boring blue-chip body.

Unilever trades at a respectable 16 times earnings and yields 3.7% in dividends. This is the closest thing you can find to a “buy-and-forget” investment.

My last recommendation might raise a few eyebrows — Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC).

Turkcell is the largest mobile telecom provider in Turkey, with 54% of the domestic market. But it also is the third-largest GSM carrier in Europe and a major competitor in the Balkans and Eastern Europe.

Sure, it’s questionable whether Turkcell is a “European” or an “emerging market” stock. I would argue that it’s both. Turkey is both European and Asiatic, and depending on where in the country you go, it can feel as modern as Italy or as backward as Kazakhstan. And in Turkcell, you get a company with a large footprint in both Europe and the Middle East. You also get a management team that consistently gets ranked among the best in Europe. This is no small accomplishment for a company domiciled in an emerging market.

While I consider this geographic diversity a strength over the long term, it has been a very unfortunate coincidence in 2011. With the European crisis to its north and the Arab Spring erupting to its south, Turkey found itself wedged between the two headline-grabbing crisis zones of the year. An uptick in the inflation rate and a diplomatic spat with erstwhile ally Israel didn’t help investor confidence much either. As a result, Turkish stocks took a beating in 2011, and Turkcell was no exception.

Furthermore, the company skipped its dividend payment this year — not because of financial distress but because of a power struggle on the board of directors. This embarrassing little spat should be resolved soon, and when it does, Turkcell’s dividend should be reinstated at around 4% to 5% of the current price.

As a result of unfortunate geography and an investor relations nightmare, investors dumped Turkcell in 2011. This creates a fantastic opportunity for those of us with patience. Turkey is one of the most promising emerging-market economies and Turkcell one of its finest companies. Turkcell trades for just 10 times earnings, and I believe this could be one of the best performing stocks of 2012.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. Sign up for a FREE copy of his new special report: “Top 5 Contrarian Stocks for 2012.” TEF, TKC, and UL are all recommendations of the Sizemore Investment Letter and are held in Sizemore Capital client accounts.

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