For Those Daring to Brave Europe, Try These Funds
These foreign large-cap value funds overweight the continent and have risen above their peers.
The eyes of the financial world are on Europe these days--its capitals and banks, to be precise. The continent continues to struggle to control debt problems that have led to steep government spending cuts, high unemployment rates, social unrest, and credit rating downgrades for some of its biggest economies, including France, Italy, and Spain. And despite a new bailout agreement designed to prevent Greece from defaulting, risks remain.
Not exactly the sort of environment that screams "economic boom," perhaps, but some investors might consider Europe's dark days an invitation to buy distressed stocks. True, European stocks have already staged quite a comeback so far in 2012: The MSCI EAFE index, which tracks stocks in developed markets in Europe, Australasia, and the Far East, is up more than 11% year to date, and the MSCI Europe Index, which tracks just European stocks, has gained a bit more than that. Nonetheless, both indexes are down more than 7% for the past-12-month period. As of Feb. 20, Morningstar's ETF Valuation Quickrank showed that the stocks in BLDRS Europe 100 ADR Index (ADRU) are trading at a discount of roughly 15% to our analysts' estimates of their fair value, a bigger discount than most ETFs that focus on U.S. equities.
Adam Zoll does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.