Author Topic: The case for Europe  (Read 2215 times)

Spekulatius

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To be a realist, one has to believe in miracles.


John Hjorth

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Re: The case for Europe
« Reply #1 on: September 27, 2018, 04:29:41 AM »
Thank you for sharing this piece, Spekulatius,

My overall line of thinking about how to proceed has also been about exactly this. I'm looking forward to the read.
”In the race of excellence … there is no finish line.”
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Spekulatius

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Re: The case for Europe
« Reply #2 on: September 27, 2018, 04:44:40 PM »
I think the authors make a pretty compelling case that Europe is undervalued vis a vis the HS, with fundamentals almost as good, but the sentiment far worse. I have an easier time finding value stocks in Europe than in the US currently, that’s for sure.
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Spekulatius

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Re: The case for Europe
« Reply #3 on: October 17, 2018, 06:09:13 PM »
Some European value stocks I am looking at:

BASFY: chemical company at a 11x PE. solid balance sheet. largest chemical manufacturer in the world.

UBS: Swiss wealth management bank, has trimmed their investment banking business. PE ~9x, P/ tangible book 1.15x

LYG: largest British bank with 30% market share. NIM almost 3%. Held back by PPI provisions ( which will be gone next year) and Brexit cinders. PE ~ 9x, 1.1x tangible book

SIEGY : diversified industrial, relatively clean balance sheet. PE~13x
« Last Edit: October 18, 2018, 04:30:11 AM by Spekulatius »
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rb

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Re: The case for Europe
« Reply #4 on: October 17, 2018, 10:00:08 PM »
I'm not disliking Europe. But i find myself asking: Is this true value or is it relative value given that the US is so expensive right now?

Spekulatius

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Re: The case for Europe
« Reply #5 on: October 18, 2018, 08:34:46 AM »
I'm not disliking Europe. But i find myself asking: Is this true value or is it relative value given that the US is so expensive right now?

The article looks at the relative discount between Europe and the US stocks and suggests that it is as large as it has ever been. So, that’s a relative valuation call. The sticks that I brought up seem cheap in absolute terms especially the finacials. There are reasons why finacials in Europe are cheap , but both LYG and UBS are real franchises too.
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TwoCitiesCapital

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Re: The case for Europe
« Reply #6 on: October 18, 2018, 01:27:26 PM »
International exposure is killing me this year. Must be about time to buy some more :/ ::shrugs::

Spekulatius

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Re: The case for Europe
« Reply #7 on: October 18, 2018, 03:00:26 PM »
International exposure is killing me this year. Must be about time to buy some more :/ ::shrugs::

The underperformance probably get worse, if the US market starts to trend down. There is a saying in the financial circles in Germany, that “if Walls Street get’s a cold, Frankfurt gets pneumonia”.
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TwoCitiesCapital

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Re: The case for Europe
« Reply #8 on: October 18, 2018, 06:02:01 PM »
International exposure is killing me this year. Must be about time to buy some more :/ ::shrugs::

The underperformance probably get worse, if the US market starts to trend down. There is a saying in the financial circles in Germany, that “if Walls Street get’s a cold, Frankfurt gets pneumonia”.

I don't know - typically I'd agree, but given relative valuations I think it'd be pretty easy to see a scenario where European equities are only down 10-15% while U.S. is down 30+ in the same scenarios. The U.S. is priced for perfection - the rest of the world isn't. Even if the rest of the world is more economically disadvantaged, they're already pricing some of that.

I'm not really buying on any economic speculation - just on the fact that relative valuations between the U.S. and really anywhere else have rarely been wider and that the USD also appears to be relatively over-valued to most currencies. Over a multi-year period, I'd expect a tailwind from both, but expect bumps along the way.

John Hjorth

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Re: The case for Europe
« Reply #9 on: October 18, 2018, 10:37:32 PM »
Isen't it perhaps about some of your stock picks, TwoCitiesCapital?

Please don't get me wrong here - I like many of them, and I think perhaps some of it is temporary for you. Here, for my part it's about your Russian stock picks, where actually the political system in your own home country creates some fuzz and volatility. [I'm not trying to start a political discussion here.]

- - - o 0 o - - -

Ref. the starting post in this topic by Spekulatius, I took a dive into the website of S. W. Mitchell Capital some time ago after Spekulatius started the topic. Quite interesting stuff there to read for inspiration to European stock picks. The firm appears quite open about what they actually invest in, in their letters for both their funds and separate managed accounts. The investment style appear to be value combined with GARP/growth.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai