"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
Warren Buffett's rule epitomizes how to take advantage of money-making opportunities in the stock market. And he's seeing serious opportunities right now -- in the past quarter alone, Buffett's Berkshire Hathaway (NYS: BRK.B) has invested $24 billion in stocks, the most in 15 years!
What's creating all these opportunities? Fear. Greece is teetering on the brink, Portugal, Italy, and Spain are in serious trouble, and the global financial system -- once again -- is sitting downhill of a slow-moving train wreck.
Blood in the streets
It probably goes without saying that Wall Street is especially reluctant to own European companies these days. Over the past six months, the Dow (INDEX: ^DJI) has fallen 4%, while European stocks have plunged 17%. The Euro itself has dropped some 7% -- remarkable for a currency over such a short period of time.
All this should suit savvy Fools just fine. The more-or-less indiscriminate selling has pushed valuations down and dividend yields up. That means opportunities for us.
About those opportunities...
According to S&P Capital IQ, a full 20 well-established eurozone companies trading on major U.S. exchanges are now yielding over 5%. Now, I'm not suggesting that you just go out and buy every European stock willy nilly (that would be foolish, with a small "f"). Europe faces some very real risks, ranging from the possibility of a deeper economic downturn to the outright default of sovereign countries and panic in credit markets.
What we're looking for are companies with reasonably stable businesses, that can afford to meet their short-term interest obligations (in case credit gets more expensive), and that earn their revenue from a diversified geographic base.
In fact, companies with significant exports from the euro area could actually benefit a bit from the carnage, as a weaker euro currency actually helps to boost their revenue.
Euro Exports as % of Revenue*
|Telefonica (NYS: TEF)||Spain||43%||4.8||10.9%|
|France Telecom (NYS: FTE)||France||30%**||3.7||11%|
|Nokia (NYS: NOK)||Finland||66%||9.0||8.1%|
|Total (NYS: TOT)||France||31%||35.1||6.1%|
|Veolia (NYS: VE)||France||27%||2.0||12.9%|
Source: S&P Capital IQ. *As of fiscal 2010. **Approximation.
Telefonica provides fixed telecommunications, mobile, and Internet services to Spain, Europe, and Latin America. It's similar to AT&T in the U.S., except that while U.S. fixed telecoms operate in a difficult, mature industry, Telefonica has access to the fast-growing countries. Over the past five years, revenues at its Latin American division have nearly doubled while operating profits soared more than fivefold to surpass its other regions in profits.
While France Telecom is more tied to euro countries than Telefonica is, the vast majority of its European exposure is to -- you guessed it -- France, which is among the strongest economies. While its European divisions could stay under some pressure, the telecom has had a great deal of success in growing its customer base, particularly in Africa and the Middle East, where it added 23% more mobile customers in the first half of the year.
OK, you probably have heard of Nokia, the Finnish mobile giant. It's struggled to maintain market share lately in the face of the iPhone-Android onslaught and is betting on its new Lumia line helping sales to bounce back. It's always a bit risky betting on slipping tech companies, but if Nokia manages to turn things around -- or even hang on to its current position -- it looks pretty cheap.
Total is a massive integrated oil and gas company -- about the size, actually, of ConocoPhillips. With 10 major drill targets this year, Total recently revised its five-year hydrocarbon production forecasts upward and has been proactively moving its money around to reduce exposure to European banks.
Veolia provides water, environmental, and energy-grid services around the world. While only a quarter or so of its revenue comes from outside of Europe, about two-thirds of its euro revenue comes from the strongest countries, France and Germany. The company has a fair bit of debt and may be forced to reduce its dividend somewhat from its lofty 12.9% yield, but it still looks pretty cheap given the relative stability of its business.
I've given you five intriguing names that are worth considering right now. However, you probably already know that while Europe may be a big reason for many of today's bargains, it's hardly the only place you can find them.
If, like Buffett, you're looking to take advantage of other opportunities in the market right now, I invite you to check out The Motley Fool's "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can download this special report for free by clicking here today.
At the time this article was published Ilan Moscovitz doesn't own shares of any company mentioned. The Motley Fool owns shares of Telefonica and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of France Telecom, Veolia Environnement, Berkshire Hathaway, and Total. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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