European Equities - Getting Tempting

[ringledman]

From a long term value investment perspective European stock markets are starting to look tempting I think.

The CAC 40 (France) is back to 1997 levels -

http://uk.finance.ya...le=off;source=;

Also only 50% higher now than in 1990.

The DAX (Germany) is at a 1998 level -

http://uk.finance.ya...le=off;source=;

Although some 300% higher than 1990 levels.

The Ibex 35 (Spain) is back at a 1998 level (or 1993 perhaps?)-

http://uk.finance.ya...le=off;source=;

The FTSE MIB (Italy) is at 2003 levels at least (cant find earlier data)-

http://uk.finance.ya...le=off;source=;

Some nice graphs for the value investors out there. Good to see the irrational exuberance of the early 2000's finally being worn off.

However market price isn't everything. In terms of value, so far from what I an see, European stocks are also heading towards tempting buying opportunities.

The crazy irrationally high price to earnings and price to book of the early 2000s seem to have regressed back to the mean (or perhaps below the mean) to signify a decent buying opportunity. Likewise dividend yields are heading back towards fair value.

Information supporting this view is as follows -

1) Shiller 10 year trailing P/E for France and Germany heading for a multidecade low and a good 5 to 6 times cheaper than the crazy valuations of 2000-
http://valuestockinq...g-europe-pe.png

2) More bearish view of Europe and the UK markets suggesting further regression in P/Es before the market becomes a real buy-
[broken link removed]
OK value perhaps but not the signs of a secular low in valuations.

3) Price to book for Europe heading towards a ratio of 1 -
http://www.morningst...0GBR04CPM&tab=3

Dividend yield of 4% ok but not high enough to signify a secular low perhaps.

Does anyone have any links to valuation metrics for Europe?

Thoughts on European equities? Sure the region is a mess but equity returns have little link to economic growth but much rather starting valuation is the real decider of stock returns.

Discuss.

 

[joe sod]

whats your opinion on commodoties, marc faber is predicting big drop in china which will affect commodities and emerging markets, from my own perspective im invested in natural gas in canada, down 30% this year and predictions are prices will stay low,

 

[ringledman]

whats your opinion on commodoties, marc faber is predicting big drop in china which will affect commodities and emerging markets, from my own perspective im invested in natural gas in canada, down 30% this year and predictions are prices will stay low,

Hi, who knows!

I like Faber, he is a sharp guy and knows the Asian market.

Personally i think commodities will struggle short term (1 year) but long term (10 years) they remain oin a secular bull market.

Natural gas is depressed but I think supply has increased significantly the last few years?

The natural gas ETFs are terrible long term (bitter experience!).

 

[Chris]

whats your opinion on commodoties, marc faber is predicting big drop in china which will affect commodities and emerging markets, from my own perspective im invested in natural gas in canada, down 30% this year and predictions are prices will stay low,

I think Faber has been talking more about a technical recession in China, i.e. if their growth goes from 10+% per year to 2 or 3% then he calls this a technical recession. This would mean that overall demand for commodities would still go up just at a slower pace. I think there are going to be lots of bumps along the Chinese road, but the same was the case in the west. If your outlook is long enough then in my opinion commodities are a great investment; even gas which could be a great contrarian investment now.