German exporters have most to gain from the weakness of the euro
Published 20/05/2010 | 05:00
SHARESCOPE'S column last week, which urged readers to sell the euro and limit share holdings in Europe to exporters, led to a fair number of emails looking for suggestions for suitable exporters.
It seems that readers of this column are not the only ones who have lost faith in the eurozone since last week's botched Greek bailout. There is certainly plenty of advice out there at the moment.
The Stoxx Europe 600 Index has fallen a stomach-wrenching 9.4pc since this year's peak on April 15 on concern that European governments will struggle to fund their deficits.
For the value of the continent's 600 biggest companies to tumble almost 10pc in little more than a month is little short of a disaster. The figures are even more depressing when one considers that the euro is close to a four-year low against the dollar and an eight-year low against the yen.
So what are the brokers recommending at this difficult point in the cycle and with the spectre of defaults in the air?
One country which Sharescope has often highlighted is Germany. Karen Olney, a strategist at UBS, says German stocks may have only begun to outperform their European peers and the sovereign-debt crisis represents a "silver lining" for the country's economy.
Germany stands to benefit from the decline because of its status as the world's second-largest exporter, Ms Olney wrote recently. The euro's retreat makes the country's products cheaper for overseas customers and increases the value of international sales.
Any effort by the European Central Bank to hold down interest rates in response to the crisis may lead to faster German economic expansion, she added.
Ms Olney singled out nine German companies that generate more than 25pc of sales outside Europe: insurer Allianz; post office operator Deutsche Post; energy company E.On; health service provider Fresenius; medical supplies company Fresenius Medical Care; engineering and gas company Linde; drugmaker Merck; software company SAP and engineering company Siemens.
Ms Olney said: "When and if the dust settles, we remind investors that we are still in a recovery, however muted it might be."
She also recommends European companies flagged in last week's column, such as brewer SABMiller, financial-services group ING Groep and drugmaker Novartis, that have more than 40pc of sales outside Europe and are cheaper than their global peers.
Mark Grammer, a portfolio manager at Mackenzie Financial Corp, is far more bearish about European stocks (because of currency concerns) but says he is waiting to pounce on companies such as Swiss-based fragrance and flavour company Givaudan, food giant Nestle and yogurt maker Danone because of their exposure outside Europe.
For those inclined to wear the green jersey, CRH and DCC are two heavyweights with exposure outside the eurozone. While CRH makes much of its money in dollars, DCC makes two-thirds of its money in Britain.
The latter company, which published another set of excellent results this week, showed once again that it is almost recession-proof, despite operating in several exciting markets.