European Equities Undervalued?

Sally57

Are European Equities undervalued compared to other regions, US, UK, Japan, Asia ex Japan etc?

We are all looking where next to invest with our ISA allowance and I personally feel that Europe at the moment is possibly the best option for some extra investment. My current European funds although only a small part of my overall portfolio are performing well. Germany is riding high, Scandinavian countries are doing well and even Spain is doing a lot better - any thoughts or views?

bowlhead99

Sally57 wrote: »

My current European funds although only a small part of my overall portfolio are performing well. Germany is riding high, Scandinavian countries are doing well and even Spain is doing a lot better - any thoughts or views?

Are you saying you have funds for each of those individual countries you named? And if they are doing well is that a reason to pile into them? The US and Asian funds have also been doing well.

Or are you saying those European countries' economies are doing well but you don't have any funds exposed to them? If so, get some, but be aware that growth in an economy is different from growth of a stockmarket and they are not always in sync. How is Spanish youth unemployment at the moment? And where should Spanish supermarkets or banks be valued. Are you a macroeconomics expert to project the economy as well as being a stocks analyst to project the market?

If so, jolly good, but I expect most here aren't so take opinions with a pinch of salt and if in doubt, invest very broadly as most of us do, rather than try to time it with specific regional plays.

MPN

I have just increased my holding in Vanguard FTSE Developed Europe Ex UK and Baillie Gifford European mainly because I believe they have done well for me over the past 4.5 years. When I looked where to invest this year I felt there is more to come in Europe compared to some of the other regions.

The Baillie Gifford fund is primarily lead by Swedish, Swiss and German equities (55%) and to a lesser extent by French, Danish, Dutch, Italian & Finnish equities etc. Therefore, I feel this goes well with my blanket Vanguard tracker for this region.

Superscrooge

I invested this years ISA allowance in Fidelity Index Europe Ex UK and it's already up 3.5%.
But of course what goes up can also go down!

jamei305

It may be undervalued in some statistical sense but then you have to price in risks such as Italian elections and systemic problems with the Euro etc. If you take a positive view on these it might still look undervalued, or you might think the current value is actually reasonable all things considered.

Morphoton

The website below will give you figures on various metrics for various countries.
http://www.starcapital.de/research/stockmarketvaluation
However whist it gives a "whole Europe" figure, it does show big differences in valuations between individual European countries.
Whilst it may seem to make sense to invest in countries with a low CAPE, AFAIK this is no evidence that this gives better returns and there are big arguments for and against this thesis.
Personally I have a fixed % in each of the above areas you mention and rebalance when they get too far away from target. Currently using TR European Growth IT for European exposure, but I do have a personal bias to medium/small companies. This IT has served me well over the last 20 years.

fun4everyone

I bought "Jupiter European" and it has done well for me

bigadaj

European assets trust has performed well for me since last summer, bought post Brexit vote so sterling devaluation has had little influence, on capital if not earnings.

Reaper

Morphoton wrote: »

Whilst it may seem to make sense to invest in countries with a low CAPE, AFAIK this is no evidence that this gives better returns and there are big arguments for and against this thesis.

If you do decide low CAPE investing in Europe is something you want to try the "Ossiam Shiller Barclays Cape Europe Sector Value" (ticker CAPE) invests in low CAPE sectors within Europe.

I offer no opinion on whether it's a good idea or not.

As far as Europe generally goes my main fear is a "Hard Brexit" which IMO is looking fairly likely. That doesn't just hurt the UK it will hurt the European companies that export to us.

Sally57

bowlhead99 wrote: »

Are you saying you have funds for each of those individual countries you named? And if they are doing well is that a reason to pile into them? The US and Asian funds have also been doing well.

Or are you saying those European countries' economies are doing well but you don't have any funds exposed to them? If so, get some, but be aware that growth in an economy is different from growth of a stockmarket and they are not always in sync. How is Spanish youth unemployment at the moment? And where should Spanish supermarkets or banks be valued. Are you a macroeconomics expert to project the economy as well as being a stocks analyst to project the market?

If so, jolly good, but I expect most here aren't so take opinions with a pinch of salt and if in doubt, invest very broadly as most of us do, rather than try to time it with specific regional plays.

Wow, well I supposed I asked for that response because I really didn't explain myself very well, so thank you Bowlhead for your comments.

In the past I have not fully committed to Europe in my portfolio (only 5% in a Vanguard tracker) and as I now have some funds available to put into my ISA, I thought I would increase my holding in Europe to include an active fund or IT. This is mainly because other markets including the US and Asia seem quite expensive at the moment but also because Europe seems undervalued IMHO. Therefore, I was really asking for views.

The type of European fund or IT I was looking for was in the stronger economies such as the Baillie Gifford fund that MPN pointed out in his post. This is one to consider as it seems to tick the boxes but I would like to look further into some IT's before making a decision so thank you to those who suggested a couple of IT's to research..

AnotherJoe

Sally57 wrote: »

Wow, well I supposed I asked for that response because I really didn't explain myself very well, so thank you Bowlhead for your comments.

In the past I have not fully committed to Europe in my portfolio (only 5% in a Vanguard tracker) and as I now have some funds available to put into my ISA, I thought I would increase my holding in Europe to include an active fund or IT. This is mainly because other markets including the US and Asia seem quite expensive at the moment but also because Europe seems undervalued IMHO. Therefore, I was really asking for views.

By what metric(s)? And taking sterling into account or not?