by winston » Mon May 18, 2015 8:13 pm
An Uptrend in Europe Emerges... Here's How to Profit By Brian Hunt and Ben Morris
European stocks are climbing… And some investors are making lots of money.
If you're not one of them, it's not too late. As we'll show you, there's still a lot of money to be made in European stocks.
For the past nine months, we've urged our DailyWealth Trader (DWT) subscribers to get into European stocks.
Our bullish thesis is simple: Europe is struggling with slow economic growth and large debts… And European politicians desperately want to play "catch-up" with their American counterparts.
To jump-start the U.S. economy after the financial crisis, the Federal Reserve launched a giant stimulus package, which included the printing of trillions of dollars. This effort helped cause a boom in stocks. Employment is growing. The housing market is recovering. Politicians are starting to look smart.
Europe's politicians want to look smart as well. And they're using a trillion-dollar stimulus plan, too. This is good news for European stocks…
Since the European Central Bank (ECB) announced its plans to pump money into Europe's economy back on January 22, the widely followed Euro STOXX 50 index – which we call the "Dow Jones of Europe" – is up 7.5%.
The index is made up of 50 blue-chip stocks across 12 European countries. They include multinationals, like British consumer-goods firm Unilever, French health and beauty product company L'Oréal, and Belgian beer-maker Anheuser-Busch InBev.
For comparison, the Dow Jones Industrial Average – which is made up of 30 U.S. blue-chips – is up 2.5% since the ECB announcement.
Even after the recent jump, European stocks look more attractive than U.S. stocks. The stocks in the Euro STOXX 50 index yield an average of 3.4%… about 50% more than U.S. blue chips. And as you can see in the table below, they're cheaper than U.S. stocks by other measures, too.
Price/EBITDA / Price/Book Value / Price/Sales / Dividend Yield
European blue chips 6.7 1.6 1.0 3.4%
U.S. blue chips 9.1 3.2 1.8 2.3%
So European stocks are cheaper and they're climbing faster than U.S. stocks… But have they run too far, too fast?
Well, if you use the U.S. as a model, the answer is "no." European stocks haven't seen nearly the gains U.S. stocks have over the last six years, since the current bull market began. The Euro STOXX 50 index is up just less than 100% since the market bottomed in March 2009. The Dow Jones Industrial Average is up 176%.
One of our favorite ways to profit on European stocks today is by owning shares of the Euro STOXX 50 Fund (FEZ), which tracks the Dow Jones of Europe. As you can see in the chart below, FEZ just hit a seven-month high earlier this month.
Please Enable Images to See this
European politicians are printing massive amounts of cash in an attempt to stimulate the economy. In the U.S., similar actions led to big gains for stocks… And we expect the same in Europe.
So, while European stocks are up, they have a lot of room to run. Make sure you're taking advantage today.
Source: DailyWealth Trader
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