Frugal Investors
Sunday, January 24, 2021
  • Home
  • About
  • Tracking Finances
  • Investment Resources
  • Savings Resources
  • Consulting
  • Contact
No Result
View All Result
Subscribe
  • Home
  • About
  • Tracking Finances
  • Investment Resources
  • Savings Resources
  • Consulting
  • Contact
No Result
View All Result
Frugal Investors
No Result
View All Result
Home Investment Resources

Why European Stocks are the Bargain of the Decade

Frugal Investors Admin by Frugal Investors Admin
July 15, 2020
in Consulting, Investment Resources
5 min read
170 2
0
Luxury brands in Europe are worth investing in
197
SHARES
2.5k
VIEWS
Share on FacebookShare on Twitter

In this short series we explore how European stocks are undervalued against their peers, and why they look set for breakout performance this decade (2020-2030).

To show you just how unpopular it is to be invested in Europe, you can look no further than this graph:

Why European Stocks are the Bargain of the Decade Frugal Investors

According to this the levels of investment in European equities are low, and have only been lower during the 2008-9 financial crisis and the double dip recession in 2011-2012.

It is entirely possible that you would look at that and think to yourself: why on earth would you want to invest in European stocks? If you want reasons, in this brief series, we’ll go through them!

1. CAPE Ratio suggests European equities are under-valued against other developed world stocks

Why European Stocks are the Bargain of the Decade Frugal Investors
Why European Stocks are the Bargain of the Decade Frugal Investors

Academic studies have shown that over 10-year periods or longer, under-valued equity markets do much better than their over-valued peers. The CAPE ratio (cyclically adjusted price earnings ratio) looks at the real earnings per share for stocks in a given geography, smoothed out by using 10 year time periods for the data. Professor Robert Shiller is famous for creating and championing the metric (description here).

Austria, Czech Republic, Poland, Spain, Portugal, Italy, Germany and the United Kingdom (which is leaving the EU) are amongst the top 16 most under-valued countries by equity market valuation.

2. Dividend Yields are unusually high and suggest higher future returns for investors

The dividend yield on the S&P 500 index is 1.9% and has risen recently due to the Covid-19 crisis. Only three months ago it was as low as 1.45%. That means you get 1.9% given to you in the form of income each year. If you anticipate a 7% return overall, then you’re banking on 5.1% capital growth each year.

Here’s a tidy summary of the yields on the European stock market indexes:

CountryDividend Yield
Austria4.1%
Czech Republic5.1%
Portugal4.8%
Spain4.6%
Italy3.3%
Germany2.7%
United Kingdom*4.3%


The average dividend yield on these seven markets is 4.13% and over double the amount of income you get from the US stock market.

Professor Jeremy Siegel, who wrote the book Stocks for the Long Run, conducted a detailed study of dividend stocks and found that higher-income producing assets tend to outperform the market averages over longer time periods.

3. European fiscal and monetary policy has loosened significantly

The European Union and the United Kingdom have opened up the purse strings and spent significant sums of money on fiscal and monetary stimulus to kick-start the economy.

Germany’s unusually stingy government approved €130 billion euros worth of stimulus; meanwhile the EU through the European Central Bank approved a €600 billion euro bond fund.

It is well documented that money drives the market: that’s where the don’t fight the fed saying comes from. In fact, this has been less of a stimulus and more of a financial bazooka.

Worldwide more than $15 trillion dollars (with a t) has been injected by central banks and governments. The EU and US are on track to have injected up to 50% of their annual GDP by the end of 2020.

The result is this – don’t expect a major stock market crash anytime soon.

4. World Class Businesses are Based in Europe

Rather than ramble through the millions of businesses that are based in Europe, and the calibre of them, it’s perhaps best visualised here:

Why European Stocks are the Bargain of the Decade Frugal Investors
Why European Stocks are the Bargain of the Decade Frugal Investors
Why European Stocks are the Bargain of the Decade Frugal Investors
Why European Stocks are the Bargain of the Decade Frugal Investors

Frugal Investors – Conclusions

You wouldn’t be amiss if you took a page out of Goldman Sach’s book and invested in the GRANOLA stocks that represented some of the best stocks in Europe.

Other passive investment strategies include following the Euro Stoxx 50 or Euro Stoxx 600 indexes.

Tune in for another series where we explore specific investment opportunities and how best to capitalise on them!

Tags: European Stocksfrugal investorsHigh dividend yieldHigh return stocksStoxx 50Stoxx 600Undervalued stocks
Share79Tweet49

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Disclaimer and Privacy Policy.

Newsletter

Welcome to Frugal Investors! If you want to join me on the journey to FIRE and to take control of your finances, then please subscribe to my monthly newsletter today.

  • Trending
  • Comments
  • Latest
Market Timing Model - January 2020

A Market Timing method that works: Sell When the S&P 500 or FTSE All-Share Cross their 200 Day Moving Average

November 17, 2019
Luxury brands in Europe are worth investing in

Why European Stocks are the Bargain of the Decade

July 15, 2020
Market Timing Model

Covid-19 Market Sell-off – We Shall Never Surrender

March 16, 2020
Global Dividend Aristocrats Portfolio

Global Dividend Aristocrats Portfolio for Canadian Investors

January 18, 2020
Why European Stocks are the Bargain of the Decade Frugal Investors

How 8 process improvement principles can fine-tune your personal finances

2
Home base with balanced british equity fund

Home Base Portfolio – Building your own balanced portfolio in the U.K.

2
Why European Stocks are the Bargain of the Decade Frugal Investors

Institutionalise how you save and track finances in order to get ahead

2
Global Dividend Aristocrats Portfolio

Global Dividend Aristocrats Portfolio for Canadian Investors

2
Why European Stocks are the Bargain of the Decade Frugal Investors

Trade Options Like a Pro in 2020 – Selling Options (Part 2)

October 5, 2020
Why European Stocks are the Bargain of the Decade Frugal Investors

Buy Apple and Qualcomm NOW as the 5G iPhone 12 Upgrade Cycle Begins

September 26, 2020
Why European Stocks are the Bargain of the Decade Frugal Investors

Trade Options Like a Pro in 2020 (Part 1)

September 24, 2020
Why European Stocks are the Bargain of the Decade Frugal Investors

How to Profit From Warren Buffet’s Bet on Japan Incorporated – Today

September 5, 2020

Recent News

Why European Stocks are the Bargain of the Decade Frugal Investors

Trade Options Like a Pro in 2020 – Selling Options (Part 2)

October 5, 2020
Why European Stocks are the Bargain of the Decade Frugal Investors

Buy Apple and Qualcomm NOW as the 5G iPhone 12 Upgrade Cycle Begins

September 26, 2020

Categories

  • Consulting
  • Investment Resources
  • Savings Resources
  • Tracking Finances
  • Uncategorized

Site Navigation

  • Home
  • About
  • Tracking Finances
  • Investment Resources
  • Savings Resources
  • Contact
  • Privacy Policy
  • Disclaimer

About

Frugal Investors – one of the fastest growing personal investment and finance sites, which pulls together “life management” and “financial management” under one roof.

Copyright © 2019 Frugal Investors - Developed by Optimizary

No Result
View All Result
  • Home
  • About
  • Tracking Finances
  • Investment Resources
  • Savings Resources
  • Consulting
  • Contact

Copyright © 2019 Frugal Investors - Developed by Optimizary

Login to your account below

Forgotten Password? Sign Up

Fill the forms bellow to register

*By registering into our website, you agree to the Disclaimer and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT Disclaimer Privacy Policy
Disclaimer & Privacy Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.