360°
Spreadsheet
With Russia threatening to invade Ukraine (as of this writing), it may be crazy to invest in Euro stocks. It’s certainly insane to invest in Russia, but what about France or Holland? Big tech fueled Wall Street gains in 2020, and the commodities rally led by oil pushed the TSX higher in 2021. Could it be Europe’s turn in 2022? From the U.K. to Germany, Europe has been battered by Covid like so many other places, but as more countries there ease restrictions, it’s inevitable that those economies will spring back after two long years. Some Euro stocks to consider:
Airbus (EADSY-OTC)
Boeing is not the only airplane-maker in the world. That’s a reminder to North American investors who suffer home bias in this very tight industry, an oligopoly really. Boeing has its pros and cons, but some investors like me feel that the company has never truly atoned for mistakes that led to crashes of its 737 Max that killed hundreds. It’s not only a moral issue, but a business one: those mistakes could happen again.
This leaves Holland-based planemaker Airbus . Trading around US$32.50, EADSY stock is currently 10% off its pre-Covid level, and there’s every reason to believe it will return to that plateau once mass air travel returns, likely this spring. The company reported last month that it had delivered 611 commercial planes in 2021 compared to 566 the year before, which helped push full-year revenue 4% higher to 52.1 billion Euros and free cash flow to 3.5 billion Euros. The company easily beat in both categories. Looking ahead, the euro stock finished 2021 with a backlog for 7,000 orders of commercial jets. The backlog also grew in its defence and helicopter businesses. Expect this cash flow to grow in 2022 and expect Airbus to keep ploughing that money into high-tech R&D. The company is pushing hard to produce its A320 and A220 planes which could give the 737 Max a run for its money.
Airbus trades at a 22.2x PE and 0.5x price/book. It pays no dividend. The street has 11 buys and one hold on the airliner. EADSY stock currently trades 10% below its 52-week peak of US$35.
Carrefour S.A. ADR (CRRFY-OTC)
Canadians may recall this French grocery store chain as a takeover target by Alimentation Couche-Tard. The deal fell through, but Carrefour continues to thrive. What could be steadier, more defensive, than Europe’s biggest grocery chain (with operations in Spain, Belgium, Italy as well as Brazil, Taiwan and of course France)? Last week, Carrefour reported that 2021 recurring operating income was up 7.7% from the year before and net free cash flow set a record at 1.228 billion euros. This will fund share buybacks and an 8% dividend hike to 0.52 euros per share.
Also, the cash will also help ramp up Carrefour’s e-commerce division. The company is now entering the final year of its five-year plan to cut costs and improve e-commerce with an eye to competing with Amazon, Lidl and the private retailer Leclerc. CEO Alexandre Bompard is currently working on the company’s next strategic plan. One pillar already has been investing three-billion euros through 2026 to expand digital.
Carrefour stock (as listed on the CAC40) has seen a fine 10.77% bump year to date and is on track to return to 18 euros and could revisit its 52-week high of 18.64 euros reached just after new year’s. However, shares remain 20% below levels when Bompard took over in July 2017. Carrefour pays a 2.64% dividend. Overall, the future looks good for this euro stock.
Vanguard FTSE Developed Europe All Cap Index ETF (VE-T)
If you want to own European stocks in one basket, consider VE ETF. The top holdings are Nestle, Roche, ASML, LVMH Moet Hennessy Louis Vuitton, Shell, AstraZeneca and Novartis in that order. It’s a mix of several industries, many defensive, with healthcare and luxury good thrown in for good measure. More precisely, 16.9% of this fund is made of financial services, 15.2% industrials, 13.6% healthcare and 11.5% consumer defensive. The PE is 16.3x, pays a nice 3.10% dividend yield and charges a low MER of 0.21%. With a beta of 0.99, VE is steady, though it averages only 3,540 in daily volume. I once owned this and it gave me some exposure to Europe. I wouldn’t make this a major part of my portfolio, but I would (and did) buy some to diversify my holdings.
