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By Holly Cook | 10-25-2012 12:00 PM

Europe Needs Credible Political Leadership

There are good opportunities in Europe if you believe that the region's political leaders will be able to hold the euro together, says Seven Investment Management's Justin Urquhart Stewart.

Holly Cook: I popped down to the London Stock Exchange recently to catch up with Justin Urquhart Stewart. He [gave] a presentation at the London Investor Show on Oct. 26, and ahead of that I wanted to get his views on a number of topics, namely his outlook for specific assets and regions, and also what lessons individual investors can learn from the financial crisis. Let's see what he had to say.

Justin Urquhart Stewart: I think investors are rather worried, and it's hardly surprising. When you look at the global economy, the news that they are fed every single day, it's hardly very encouraging. And so you see markets which are generally looking pretty erratic and when you are seeing an economy which has suffered the explosion--the huge financial devastations that you saw in 2008--well that's enough to put most people off until they can start seeing a trend. However, I think actually this is a time you should be looking very closely, because there are good issues there to be had.

Cook: So, that's an interesting point. I mean, trying to time the market can get you into a lot of hot water, but we do keep hearing again and again that European equities, for example, are at a really good place right now. Is this time to top-up do you think?

Urquhart Stewart: Well, you are absolutely right. Timing the market is always difficult, it's time in the market was always the phrase. Having said that, very occasionally you get something which I think John Cleese would normally refer to as ‘the bleeding obvious,’ when you come across something, companies, say you take a company like Siemens or BASF, where we have seen in the past couple of years a couple of occasions where that whole index and those stocks dropped by 20%, 25%. So, despite the issues of euro are you really telling me that these profitable businesses which are growing, suddenly are now three quarters of the values that they were?

So, you can look at that and say ‘actually that's a very good opportunity, I want to go and buy that’. But they come up every so often and quite rarely. Equally, of course, you don't have to be a stock-picker. You can just play that index and say that [European] index is being suppressed by the lack of credible political leadership. If you think that's going to change and the euro is going to survive, then there is a classic case of actually being able to pick up an asset at a discount.

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