Perhaps the European Union was doomed from the start and it just took a decade for the more productive member states to realize it.
If you went into a business with a bad partner is there any way for it to work? Inevitably there will be a split and that might be the case for the EU members and the battered euro.
Regardless of the end result shrewd investors should be on the lookout for stock bargains in large successful European companies undermined by the failure of the monetary system. The following three stocks are examples worth considering.
Novartis (NVS) of Switzerland, in the health care industry, is the second largest producer of generic drugs and a leading provider of eye care products. It has been pounded by the downfall of confidence in the euro area system, often referred to as the eurozone. As the five-year chart below indicates the stock had worked its way up to a high if $56.42 before the Greek tragedy created a European nightmare.
Yesterday, Novartis closed at $44.35, down over 23%. It is trading at a slight discount to Teva Pharmaceuticals (TEVA) and Johnson and Johnson (JNJ) with a P/E of 12.02 and has a far superior dividend yield of 4.32%
Telefonica SA (TEF) of Spain has sunk even further than Novartis, off 37% from its recent high of $89.62 to yesterday's final number of $56.66. Spain has debt and banking problems and trades in the euro, unlike Novartis, which is a Swiss company. Some think it is the next domino if the EU does not support Greece to the fullest extent possible.
Looking at its five-year chart, it has been punished for its geographic location, almost dropping to last year's lows. This may be undeserving since most of its business is outside the country with a major stake in South America -- and growing. The stock sells for a lower P/E than AT&T (T) or Verizon (VZ) at 11.47, but more importantly it pays a higher dividend, now at 7.9%.
Unilever ADR (UL) of the Netherlands is a diversified food and household products company with known brand names like Breyers ice cream, Dove and Lux soaps, Lipton tea, and the Vaseline personal care product line. Unilever was the number one consumer products maker worldwide -- until Procter & Gamble (PG) purchased Gillette in late 2005.
At yesterday's close of $26.20, the stock is selling at a discount to the market and is more diversified than Novarits and Telefonica, which makes it the safest play. It is also paying a higher than average yield of 3.51%.
A devalued euro may mean that these three companies, which have global market share now, will have a more competitive advantage going forward. If one were to buy all three, one would have an extremely diversified portfolio with global reach and very strong dividend yields fueling one's retirement.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: At the time of this post he owned shares of JNJ and NVS.