Eurozone stocks have been out of favour for years. But with investors reassessing their investment strategies as interest rates rise, Eurozone stocks could be big winners from the “value trade”. According to Goldman Sachs research, Eurozone companies are now the cheapest in the developed world. What is more, in GS’s opinion, they may offer the most upside potential. Below we look at five value Eurozone stocks.
The companies listed are all found in the ETFS EURO STOXX 50 ETF (ASX Code: ESTX).
The largest Spanish bank by far, Banco Santander is a truly global player with a large footprint in the US, Latin America and the UK. The company’s bread and butter is providing cheap consumer and commercial loans. It does not have a strong investment banking division. Banco Santander’s share price came under intense pressure for years due to Spanish housing crisis. These difficulties were exacerbated by the European Central Bank’s decision to keep interest rates near zero for 10 years. (When interest rates fall, bank profitability falls too). However the company appears to be turning a corner. It recently pledged to boost its dividends thanks to rising profitability. It is benefiting from Eurozone interest rates rising after a decade on ice.
The Germany chemicals giant is perhaps best known for aspirin, the world’s most popular pain killer. The company has landed on very rough times the past few years because its acquisition of Monsanto exposed it to lawsuits. It also saw its patents expire on its two bestselling drugs. However the company has taken new direction under Stefan Oelrich to focus on innovative biotech in a quest to uncover more IP. And the Monsanto lawsuits are now behind it.
ING Groep NV
When Aussies see the ticker ING they tend to think of Ingham’s Chicken. But the Amsterdam banking giant ING is the more famous business globally. ING’s main business is in Europe -- especially the Benelux countries where it is headquartered and where it remains the most influential retail bank. ING’s share price was hit hard by the pandemic due to interest rates falling and loans failing, like other retail banks in Europe. However its share price has since recovered and, like Santander, is benefitting from rising rates.
Germany’s primary exchange operator is one of the most successful financial institutions in Europe. It’s share price has steadily climbed over the past 10 years on the back of reliable earnings growth. What is more, the company has been one of the most progressive adopters of blockchain. It plays host to the largest universe of crypto ETFs and has moved to put blockchain technology at the heart of its settlement system. However, the company may have a claim to being a value stock due to its lower valuation compared with other global exchanges, such as the ASX, Nasdaq, Hong Kong Exchange.