Author Topic: European stocks for the long run?  (Read 10187 times)

xxx1313

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European stocks for the long run?
« on: November 06, 2010, 02:25:19 PM »
In my home country (Austria) capital gains from stocks bought this year will remain exempted from tax for many years, whereas gains from stocks bought after January 1, 2011 will be taxed. This is an incentive to buy stocks now for a long period and ideally forever - a discipline Warren Buffett would have no problems with. As a European investor, however, I have some problems to identifiy enough growing bellwether stocks with defendable moat. As I expect the USD to stay weak compared to the EUR in the long run, I would prefer European stocks. This is no absolute k.o. for US stocks in my opinion, but a disadvantage.

Up to now, the following European stocks came to my mind as possible targets:
- Nestle
- Unilever (only little growth, however)
- Tesco
- Siemens
- BP (turnaround situation, little long-term growth, but not a bad company in my opinion)
- Pargesa (holding company with investments in Lafarge, GDF Suez, Total and Pernod Ricard)
- SAP AG
- H&M (a bit expensiv now)

More ideas would be highly appreciated. Thanks in advance!

xxx1313


alwaysinvert

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Re: European stocks for the long run?
« Reply #1 on: November 06, 2010, 03:09:19 PM »
Two other Swedish large caps, apart from H&M:
Svenska Handelsbanken - One of the largest Swedish Banks, not exposed to the credit troubles in Eastern Europe, very cautious bank without any incentive programmes for management whatsoever. Made it through both 2008 and the collapse of the Swedish Krona in 1991 pretty much unscathed, while all competitors leaned on the government for support (and/or went bankrupt or merged/got sold off). Allegedly the best stock in the history of the world with a rise of 1.9 million percent since 1900 (excluding dividends, which have been in the high-end spectrum). Credit losses are extremely low. Were scaling back during the boom years when the other banks went haywire, mostly in Eastern Europe with loans without any security, and then started expanding rapidly when the economy struck great blows against the other banks.

Swedish Match - Completely dominates the Swedish market for snus (moist powder tobacco) with an 85% market share and the Norwegian with a 60% market share, if I remember correctly. Also big on the US market with snuff, snus, chewing tobacco and cigars. They are refocusing on their core business (smokefree tobacco) and selling off the other parts. Huge buyback programme, and dividends at about 2%. Has historically performed amazingly as well, with their huge margins and near-monopoly position.
« Last Edit: November 06, 2010, 03:11:13 PM by alwaysinvert »

StubbleJumper

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Re: European stocks for the long run?
« Reply #2 on: November 06, 2010, 04:13:11 PM »
As I expect the USD to stay weak compared to the EUR in the long run, I would prefer European stocks.

I have no doubt that the US will devalue.  But do you really think that the Euro-zone will devalue less?  You guys are saddled with all of the problems of the PIIGS who clearly do not have a culture that will enable them to take bad medicine....even the French are resisting the bad medicine that they clearly need.  The Euro zone is a mess and will either need to inflate or disintegrate.  Norway will ultimately be happy they steered clear, and the UK will be happy they at least opted out of the currency union.

I would re-think your US vs Euro views.  If you are really concerned about the US, go with Canada or Australia....but in your place, over the long term I'd want to diversify away from the Euro and all of the weak players that look like they will be forced to default.

SJ
« Last Edit: November 06, 2010, 04:15:13 PM by StubbleJumper »

SharperDingaan

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Re: European stocks for the long run?
« Reply #3 on: November 07, 2010, 01:22:42 PM »

3 considerations:
- You really want to be holding something stable in a petro-currency, & let Euro devaluation against that currency boost your return. A Cdn Sched-A bank, or dominant life insurer, should head your list (ie: 8 names)
- If you must stay in Europe you want a beat-up government backed vehicle, where your bigger risk is dilution vs bankruptcy. The expectation is that the company will look very different < 2-4 yrs. BP makes good sense, similar thing for the major german industrials, & the spanish bank.
- If you're restricted to Europe, & low risk, buying a concentration in almost any one or two european majors will do - provided you roll in your purchase over a 1-3yr period. The expectation is that at least some of your buys will be good ones, & the major will eventually either buy out somebody - or get bought out.

SD

xxx1313

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Re: European stocks for the long run?
« Reply #4 on: November 07, 2010, 02:00:49 PM »
Many thanks for your ideas and the discussion!

@alwaysinvert:
I am very cautious with banks. Banking is necessary, but banks are not. Less than two decades ago, Sweden had to nationalize its banking system, as far as I remember. Svenska Handelsbanken may be good quality, but banks are not really within my circle of competence. Swedish Match looks good. Another Swedish company I already took a look at is SCA (Svenska Cellulosa). Not a bad company.

@StubbleJumper, SharperDingaan:
The Eurozone has its problems, because Europe did not reach a real political union by now. If we had the "United States of Europe", nobody would care about the deficits of Greece, Portugal or Ireland. In the US, California and probably some other states are basically bankrupt, but the market does not care about it. What really scares me is that the Fed clearly seems to accept future inflation, the ECB does not (at least by now). I still think that the Eurozone may survive and make its way. Norway is a small country, running out of oil soon and its sovereign wealth fund is heavily invested in USD an EUR. Still, it might be a kind of a safe haven. Unfortunately, except Statoil and Seadrill I do not know many Norwegian companies. Investing in stable companies in a petro-currency is worth thinking about, thanks for the idea.

tombgrt

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Re: European stocks for the long run?
« Reply #5 on: November 07, 2010, 05:09:31 PM »
As I expect the USD to stay weak compared to the EUR in the long run, I would prefer European stocks.

I have no doubt that the US will devalue.  But do you really think that the Euro-zone will devalue less?  You guys are saddled with all of the problems of the PIIGS who clearly do not have a culture that will enable them to take bad medicine....even the French are resisting the bad medicine that they clearly need.  The Euro zone is a mess and will either need to inflate or disintegrate.  Norway will ultimately be happy they steered clear, and the UK will be happy they at least opted out of the currency union.

I would re-think your US vs Euro views.  If you are really concerned about the US, go with Canada or Australia....but in your place, over the long term I'd want to diversify away from the Euro and all of the weak players that look like they will be forced to default.

SJ

I agree. (And this is coming from an European who has been buying dollars for the last two weeks and will continue to do so if the euro appreciates more against the dollar. Only have fairfax as an overseas investment atm tho...)


I have some stockidea's I founded mostly based on both moat and growth, not looking at the current prices :

- Telefonica
- Danone
- Nestlé
- Vinci SA
- Boskalis Westminster (and watching competitor CFE too but that company is 6 times smaller at +- 500M market cap)
- Fugro
- LVMH
- GlaxoSmithKline
- Siemens
- SBM Offshore
- Novartis
- Sanofi-Aventis


I have not done any thorough research but this is basically a list of companies I will have a closer look at asap.

GBL (The holding which Pargesa partly owns) is also pretty decent but I am afraid Albert Frère doesn't come anywhere near Buffett or Watsa in terms of investing skills. But a great discount to book, that is a fact.

(Sorry for any possible "stupid" choices, as I am rather new to investing. ;) )
« Last Edit: November 07, 2010, 05:19:00 PM by tombgrt »

menlo

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Re: European stocks for the long run?
« Reply #6 on: November 08, 2010, 12:46:56 PM »
Another Swedish company (not sure why this is a recurring theme...) to review is Kinnevik (KINVB).  It's a holding company, and if one believes their reporting (I did - I'm an owner), their 30 year annualized return is 21%.

I found it while researching Millicom International - MICC is the largest holding of Kinnevik (40+%), and since KINVB trades at a discount to NAV, you get MICC pretty cheap. 

There are other listed holdings, a large non-listed company (pulp), and numerous venture investments.  Geographically, one gets exposure to non-Asian emerging markets (Latin America, eastern Europe and Africa).

The current yield is just shy of 3%.

The discount to NAV is in the 30-40% range (per US and Swedish analysts; the company's Q3 report calculates the discount at 30%).

Their English reporting is excellent and it's easy to buy via the local exchange.






Myth465

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Re: European stocks for the long run?
« Reply #7 on: November 08, 2010, 03:03:43 PM »
I am more worried about the EU then the US and I think the US is in terrible shape. At the end of the day Americans will take the pain and the politicians will work things out (like 5 year olds trading baseball cards).

The EU doesnt even have a government (well one with any real power) and France is striking over a rise in retirement from 60 to 62. I was talking to a person on a plane over to Europe and I think Europe has it right (we are here to live not work). The problem is the world isnt as it should be, it is what is what it is. You can adapt or be forced to adapt. Those are pretty much your only 2 options.

StubbleJumper

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Re: European stocks for the long run?
« Reply #8 on: November 09, 2010, 03:19:23 AM »
I am more worried about the EU then the US and I think the US is in terrible shape. At the end of the day Americans will take the pain and the politicians will work things out (like 5 year olds trading baseball cards).

The EU doesnt even have a government (well one with any real power) and France is striking over a rise in retirement from 60 to 62. I was talking to a person on a plane over to Europe and I think Europe has it right (we are here to live not work). The problem is the world isnt as it should be, it is what is what it is. You can adapt or be forced to adapt. Those are pretty much your only 2 options.


Too many EU countries (the UK and Germany excepted!) have citizens who seem to think that they can get something for nothing.  The people protesting budget cuts in Greece and the folks protesting the need to increase the retirement age in France seem to be living in some parallel universe where GDP and tax dollars just magically appear to make everybody's life better at the cost of nobody.  There seems to be a complete inability to have an "adult conversation" within the countries about the options that are realistically available to them. 

The protests in France are the biggest joke in Europe.  The choices about public pensions are relatively straightforward.  You can reduce monthly benefits, increase the contributory period, or increase tax rates.  It's really quite simple....just choose one of those options.  The population went ballistic when the government increased the contributory period, yet I did not see a single placard from protesters asking to instead reduce the monthly stipend, or to increase taxes (at best, the intelligencia would have recommended a tax increase for a mysterious, mythical group known as "the rich").  The response was a series of immature protests like a bunch of petulant children.

I am very happy to not be sharing a currency union with countries like that.  Canada took its bad medicine in the 1990s, and I am optimistic that the US will eventually come around.  But those Mediterranean countries just don't seem emotionally equipped to do what is necessary.  Too bad.

SJ

twacowfca

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Re: European stocks for the long run?
« Reply #9 on: November 09, 2010, 03:38:38 AM »
Another Swedish company (not sure why this is a recurring theme...) to review is Kinnevik (KINVB).  It's a holding company, and if one believes their reporting (I did - I'm an owner), their 30 year annualized return is 21%.

I found it while researching Millicom International - MICC is the largest holding of Kinnevik (40+%), and since KINVB trades at a discount to NAV, you get MICC pretty cheap. 

There are other listed holdings, a large non-listed company (pulp), and numerous venture investments.  Geographically, one gets exposure to non-Asian emerging markets (Latin America, eastern Europe and Africa).

The current yield is just shy of 3%.

The discount to NAV is in the 30-40% range (per US and Swedish analysts; the company's Q3 report calculates the discount at 30%).

Their English reporting is excellent and it's easy to buy via the local exchange.








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