Rory Bateman, Head of European Equities at Schroders, discusses why he thinks Europe remains a good hunting to find companies with excellent future growth prospects. Access the article here" target="_blank">http://www.schroderstalkingpoint.com/node/1106">here.
In summary:
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In Europe, the emergence of a 'two-speed' economy in terms of growth naturally prompts a focus on robust, global franchises within the core European countries. With these nations proving the engine of growth in the region, it is clear that it is core Europe that matters.
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This is not to say that there are not compelling opportunities to invest in growing companies based in the peripheral nations but, as austerity measures take hold, it makes sense to avoid companies that rely largely on domestic demand to drive their revenues.
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It is worth noting that the peripheral countries of Portugal, Ireland, Greece and Spain make up less than 12% of European GDP and less than 7% of European market capitalisation.
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With the risks in perspective, we think there are a number of compelling reasons to invest in European equities, notably: (i) strength in core Europe (ii) a healthy corporate sector (iii) exposure to emerging market growth (iv) attractive value, and (v) competitive dividend yields.
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We believe now is a cheap entry point and that many companies in Europe have excellent future growth prospects.
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