Europe’s struggles make blue chip share prices cheap
NEW YORK: This is a good time to make money off of someone else's misfortune.
One of the best, but rarely followed, rules of investing is to buy when things look bleak. Blue chip stocks in the euro zone are down 5.5 percent since it became clear in midApril that Greece needed help to prevent it from defaulting on its debt. Some economists speculate that the bailouts of Greece and Ireland mean that the euro won't longer.
Investors are waiting to see whether the European Central Bank takes additional steps this week to prevent Europe's financial crisis from spreading to Spain and Italy. That uncertainty has created stock bargains. You may not find the same parade of oncein-a-lifetime deals as during the 2008-2009 financial crisis when General Electric Co.
last much traded as low as $7.06 (it closed at $16.78 on Friday). But the broad retreat from anything associated with Europe means that there are easy pickings. Take French oil giant Total SA. It has fallen 21 percent this year and is trading at a price-earnings ratio of only 8.3. "The company has become incredibly inexpensive," says Cody Dick, an analyst with Dreyfus Worldwide Growth, a $430 million mutual fund that is buying Total. "When you look at the stock compared to its peers it's been unjustifiably discounted."
At $51.34, the stock costs about what it did during the financial crisis in October 2008. It comes with a dividend yield of 4.9 percent. Competitor BP PLC, meanwhile, doesn't offer a dividend.
Though Total has its headquarters in France, its revenues are global. -Ap
PARIS: Major Andre Turcat, French first test pilot of the Concorde, left, talks with Chief Mecanicien Michel Retif who was in the first flight of the Concorde, center, and Jean Belon of the French manufacturer of engines for aircrafts SNECMA during the Air France Concorde crash court case in Pontoise, north of Paris, Monday. -Reuters