European Companies Undervalued

Shares in European Companies remain cheap compared to other markets yet they continue to be avoided by investors over fears of a Euro devaluation. Mario Draghi’s recent promise to “do whatever it takes” to save the Euro helped European stocks to rally in mid 2012. Also, the intervention of the European Central Bank to bailout ailing European banks and to promote a Banking Union, has helped to reduce the borrowing costs of debt laden countries like Greece and Spain. Nevertheless, the prospect of bank runs and a devaluation of the Euro remain real prospects as many fear that some of the Spanish banks in particular have built up unsustainable losses.

However, despite these problems, the Eurozone offers a wealth of profitable companies who are in good financial health. European companies have improved their balance sheets in recent years and hold near record levels of cash. At the same time they have been paying off debt, leaving them in a strong position to finance growth and making them more resilient to downturns in the market.

Negative sentiment in the European markets has created plenty of opportunity for investors to purchase assets at bargain prices. Investing in Europe could present significant opportunities depending on your view of prospects for the Euro maintaining its value.