The Global Guru: Why Europe is Where the Money is in 2013

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Europe has gotten a lot of bad press lately.

Only a year ago, the London Financial Times fretted that the euro had just a few weeks to live. I attended a compelling presentation at the Oxford Business Club that boldly predicted that it was virtually certain that Greece would be out of the euro by the end of 2012. I recall a day in the fall of 2011 when the fate of U.S. markets was held hostage to a vote in the Slovak parliament, which was deciding whether it would approve the latest incarnation of a European bailout for Greece.

Fast forward 12 months, and the picture is very different.

European stocks have trounced the U.S. S&P 500. The Europe ETF MSCI Vanguard (VGK) has soared 18.48% over the past six months. That compares with 8.27% for the SPDR S&P 500 ETF (SPY).

In 2013, the contrast may become even more extreme. Yes, the U.S. S&P has had a strong start, rising 3.2%. But the iShares MSCI Germany Index (EWG) is up 6.37% already this year.

What about the infamous PIGS — Portugal, Italy, Greece and Spain?

Well, the ones for which you can buy exchange-traded funds (ETFs) are doing just fine, thank you.

iShares MSCI Italy Index (EWI) is up 5.41% and Global X FTSE Greece 20 ETF (GREK) is up 4.54%. iShares MSCI Spain Index (EWP) trounces all of them by soaring 6.48%.

In fact, these former ne’er do well stock markets are the top-performing markets in the world among the 37 that I follow for my clients at Global Guru Capital as part of my “Global Gains” investment program.

Why Europe Beats the United States

All of this may leave you scratching your head.

After all, isn’t Europe just a museum stuck in a recession?

How can European stocks be doing so well when France, with its 75% tax rate on high earners, is chasing national icons like Gerard Depardieu to Russia?

Here’s a reality check…

Once the world stopped fretting about Europe’s imminent collapse, the prospects for European stock markets weren’t as bad as investors thought.

It all comes down to good old-fashioned valuation.

First, unlike just about everything else you can buy, European stocks are simply cheaper than those in the United States.

Cyclically adjusted price/earnings (P/E) ratios are among the few relatively reliable predictors of long-term returns. These P/E ratios are at very reasonable single-digit or low double-digit levels in Europe. That compares with an historically pricey P/E ratio of 21 in the United States.

Second, European company margins are at a 20-year average. That compares with the United States, where margins are at an historic high. So Europe has much more room for upside surprises on a company level as well.

The truth is Europe is both “under-owned and under-loved” — and a better bet for 2013 than the United States.

My Favorite European Market for 2013

With so many global markets bursting out of the starting gate in 2013, you may find it difficult to know where to put your money to work.

Yet, if I had a single favorite market in the world at the moment, it would have to be tiny Ireland.

Ireland has suffered severe austerity over the past few years.

But it has sucked it up, stuck to its low tax principles, and its economy has grown over the past two years.

And, yes, there are grumblings that the medicine it took was too bitter, with the Irish taxpayer on the hook for European banks’ bond losses.

In comparison, the noisy Greeks have gotten away with a massive write-down of their obligations.

But perhaps there is cosmic justice after all.

Unlike the Greek economy, the Irish economy has finally turned, and there is light at the end of the tunnel.

And my subscribers at Bull Market Alert have profited handsomely so far in 2013, with my recommendation of Bank Ireland (IRE) soaring 30.62% in 2013 alone.

With billionaire contrarians such as Wilbur Ross and private equity firms buying into Bank of Ireland (IRE) in July 2011, there is plenty of “smart money” behind this trade.

I strongly recommend that you join my Bull Market Alert subscribers by betting on the Irish recovery as well.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

share on:

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor