Nothing's hotter than
investing internationallyright now. But if you're looking
for great values in an international market that still has
the potential for modest long-term growth, there's one part
of the world that hardly anyone is talking about right
now.
Lately, when you hear about international investing, most
people immediately gravitate to the recent explosive moves
among the
emerging marketsof China, Brazil, and India. Before
anyone was investing in those countries, though, the
developed markets of western Europe combined Old World
stability with a cosmopolitan attitude toward business and
investment. Even though Europe faces plenty of challenges
right now, investors looking for good value abroad should
definitely take a closer look.
The contrarian approach
There's good reason why most investors are focusing
squarely on markets other than Europe right now. While
emerging markets offer access to
billions of potential consumers, many of whom have never
enjoyed the products that companies hope to sell to them,
European markets suffer from adverse demographics.
Population growthis virtually nonexistent in Europe, and
it may easily drop to negative levels in the coming years,
pressuring European companies in their home markets as total
consumption falls.
Those headwinds are evident in projections of economic
growth. Even though most people think the U.S. economy has
been horrid recently, GDP in the Euro zone has fallen even
further, with projections for the full 2009 year of a 3.8%
decline versus the U.S.'s 2.5% drop. Moreover, the expected
rebound next year will likely be muted in Europe, with
estimates of 1.2% growth coming in at less than half the U.S.
growth rate. In contrast, India and China have sustained
substantial growth, which is expected to continue. Brazil is
seen rebounding strongly as well.
Looking for value
Europe particularly distinguishes itself with its
attractive stock valuations. Although the major emerging
markets are all up 65% or more so far this year, most
European markets have seen a much more restrained rebound.
That makes Europe a likelier place to find
good international value stocks, especially for those
hoping to protect themselves from a possible correction that
could grow into a sustained market downturn.
For instance, take a look at where some popular
value-based international funds are investing their money
right now:
Fund
5-Year Avg Ann Return
Assets Invested in Western Europe & U.K.
Holdings Include ...
Vanguard International
Value (VTRIX)
6.9%
58% Continued... |