3 Stocks to Beat the Eurozone Downgrades
Jan 17th 2012 1:19PM
Updated Jan 17th 2012 1:20PM
Standard & Poor's gave the eurozone a beating last week and it isn't apologizing one bit for it.
The ratings agency downgraded nine eurozone countries -- including France, Austria, Italy, and Spain --citing their inabilities to meaningfully deal with the ongoing debt situation in Europe as the primary cause. With debt talks between Greece and other members of the European Union going nowhere, and Italy's 10-year lending rate once again creeping dangerously close to the 7% level, you might be under the impression that the entire EU should have yellow caution tape around it. For the most part, you'd be correct. However, not everything is worth throwing out with the bath water.
There's one easy way to still get European exposure without having to feel the effects of what seems like the forgone conclusion of a recession in the eurozone: Buy diversified, stable businesses.
It sounds so simple, but the majority of companies in Europe are at serious risk of seeing their bottom lines hit if the region dips into a recession. Luckily, after some careful perusing, I came across three companies that will still give you European exposure minus a lot of the risks associated with a slowdown in the region.
Unilever (NYS: UL)
One way to avoid the perils of a slowdown is to focus on necessary goods. The draw of necessities is that regardless of the surrounding economy, consumer demand remains fairly stable. Unilever takes care of this by offering a huge portfolio of food items across Europe (as well as globally). Despite two global recessions over the past decade, Unilever has remained profitable in every year and pays out a healthy dividend north of 3%. It isn't the cheapest stock on the block, but consistency has remained the key to Unilever's success over the years.
BHP Billiton (NYS: BHP)
If you can't avoid a slowdown completely, by finding a company like BHP Billiton, which has its fingers in pretty much every aspect of metals, mining, and drilling across the globe, you definitely better your chances of succeeding. BHP's portfolio of products actually acts as its own hedge. When times are good, its oil and gas operations push profits higher. When times are rough, its metals business often picks up the slack. For 2011, shareholders were spoiled by record sales, profits, and dividends, and BHP doesn't appear to be skipping a step through the first two weeks of 2012.
Coca-Cola Hellenic Bottling (NYS: CCH)
Just like Unilever, Coca-Cola Hellenic Bottling, a manufacturer and distributor of non-alcoholic beverages in Europe, is relatively immune to Europe's hiccups. In its latest quarterly filing, the company noted that volumes were flat (no pun intended) while net revenue rose by 1%. The bottler remains solidly profitable despite Europe's woes and is actually being affected more by rising material costs than by weakening consumer demand. Coca-Cola Hellenic has been profitable in every year for the past 10 and has paid out a higher dividend every year since 2004. This looks like a European stock worth betting on.
Europe might be a mess, but not every stock deserves the caution-tape treatment. Narrow your European investments to diversified, stable operations that are unlikely to be affected by a downturn and you'll probably have a recipe for success.
What stocks in your portfolio are primed to be winners in Europe? Share your thoughts in the comments section below and consider adding these stocks to your free and personalized watchlist to keep up on the latest news with each company.
- Add Unilever to your watchlist.
- Add BHP Billiton to your watchlist.
- Add Coca-Cola Hellenic Bottling to your watchlist.
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