David Evanson and Oliver Pursche
Minyanville.com, Summer, 2012
And this brings me unhappily – or depending on your perspective, happily – to Europe. Fear is rampant in the streets, along with protesters, and in some cases tear gas. Nary a painter or idle philosopher is to be found on the Left Bank.
Ripe conditions for being not greedy per se, but rather prudently speculative. If you believe, as I do, that Europe will ultimately fix its ills and get back to growth, then it is worthwhile to take a look at some multi-nationals that have underperformed, here and across the pond. European multi-nationals are steeply undervalued at this stage. The shadow of macro and geo-political uncertainties has driven European markets downs sharply. All the while, earnings estimates have only been brought down minimally for many of Europezzs greatest companies – Phillips, Leggett & Platt (LEG), Unilever (UN), Total SA (TOT), British Petroleum, and Novartis (NVS), to name a few.
Simultaneously, we observed that so far this year, three and a half as many European companies within the STOXX 600 (as compared to last year) beat sales and revenue estimates, while there have been nearly twice as many earnings per share beats than misses.
In fact, dour as the global mood may be, I would not hold off the possibility of a second half rally. Here are the catalysts, of which two have already been realized.
1. Greek elections occur successfully. Check.
2. European leaders become more proactive in dealing with the debt crisis. Check.
3. Second quarter earnings season impresses investors
4. The Fed unleashes QE 3
5. Bond fund assets begin flowing into equities
Should this rally materialize, below are 10 names I though could exhibit constructive beta. Should the rally not materialize, I believe these are stocks that can weather the storm, continue to pay dividends, and someday, over the next two horizons perhaps, reward investors handsomely for their patience and confidence.
Stocks That Could Exhibit Constructive Beta:
Total SA, Yum Brands (YUM), McDonaldzzs (MCD), Owens Illinois (OI), Advanced Micro Devices (AMD), Caterpillar (CAT), Fluor Corp. (FLR), Chevron (CVX), Raytheon (RTN), JB Hunt Transport (FF)