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This year, European and U.S. stocks have been running neck and neck, with the major indexes representing the regions up about 10% each.
There’s reason to think European stocks might outperform. The coronavirus pandemic has hit Europe harder than the U.S., both medically and economically. As Europe is catching up on vaccinations after a slow start, and as its economy is opening up, the opportunity for a U.S.-style acceleration of the kind evidenced in the March retail sales and consumer price reports becomes increasingly likely.
With that backdrop, and as European earnings season kicks off this week, Barron’s looked for companies expected to see the best earnings growth this year. This improved outlook may already be reflected in the price, so Barron’s also screened for companies with price-to-earnings ratios below 25.
The methodology by definition excludes companies that lost money last year—you can’t have a price-to-earnings ratio without earnings—so out go the airlines and other travel-oriented stocks that could squeak out a profit in 2021.
The resulting list gets you the types of companies that would attract an investor to Europe in the first place: finance, commodities and industrials companies that would typically appeal to a value-oriented investor, or one looking for cyclical plays.
It’s a list led by 3i, the U.K. private-equity firm.
(ticker: 3IN.UK) to a degree is a play on a discount retailer, Action, which has over 1,700 stores across Europe and accounts for nearly half of 3i’s current portfolio.
It also includes
(DAI.Germany), the auto maker which on Friday said first-quarter results would top consensus expectations due to strong demand.
