Investors in the US and elsewhere watch their stocks rise and fall based upon the latest news about the European debt crisis but what about investing in Eurozone stocks at this time? Is it time to buy when investing in Eurozone stocks or time to sell European stocks ? There are a number of factors to consider when investing in European stocks or getting out of European stocks at this time. Basically these factors have to do with whether or not European companies will make money and if that will be translated into profits for investors. The European Union has an economy roughly as large as the United States. Another recession in Europe, brought on by a failure to deal with the debt crisis would likely reduce factory output and business in general, bringing down stock prices in general. However, not all stocks go down during a recession.
Consumer Stocks, Oil, International Sales, Protected Niches
Consumer product stocks in Europe as in the USA tend to do well during difficult economic times and could be good choices if the Eurozone debt crisis goes from bad to worse. Commonly a good stock investment will be found by the same criteria in Europe as in the USA. Some products, think commodities, are driven by global demand and not local demand. Investing in oil – think North Sea, British Petroleum, etc. – could be a means of sidestepping any local damage from the lingering debt crisis and tapping into, hopefully, growing demand for energy as the rest of the world recovers. The Big Oil Company, BP, has global reach and, as such, the European Union is only one of its markets. This brings to mind other global actors such as Siemens. The European GE makes high tech products that it sells across the span of the globe and will likely keep selling even if the Eurozone has problems. Siemens and its global reach also remind us of drug stocks. When investing in Eurozone stocks do not overlook pharmaceutical giant, Roche. Pharmaceuticals are like consumer items in that they are, to a degree, recession proof.
The Euro and Exchange Rates
This is a basic factor when investing in Eurozone stocks in the current environment. As the Euro suffers from the eternally lingering debt crisis many good stocks denominated in Euros may be underpriced if looked at from the viewpoint of sales and the factors that contribute to a margin of safety such as lack of debt. Here we are not talking about European stocks listed as American Depository Receipts on the New York Stock Exchange but stocks listed on Euronext or regional exchanges such as Deutsche Börse or The London Stock Exchange. In fact, a weaker Euro may be a blessing for European companies wishing to compete in foreign markets. The export driven economies of Japan, Taiwan, and mainland China have intentionally purchased dollars for years in order to keep the Yen, Taiwanese dollar, and Yuan weaker than they would otherwise be. As always a bit of investment research is necessary to find and capitalize on opportunities when investing in Eurozone stocks. After analyzing the market and individual stocks, investors may choose to enter this area or stay away. Either decision may be correct depending upon the individual stocks involved and the status of the Euro.