Trustnet Magazine Issue 12 November 2015 | Page 26

IN THE BACK

STOCKS

THE

LOST CONTINENT
FP CRUX’s Richard Pease says investors who are avoiding Europe due to the dire
economic situation are missing out on some quality global names

C

autious investors could be
forgiven for being reluctant
to favour European
markets, given the steady flow of
bad economic news coming from
the continent. The Greek sovereign
debt crisis, the potential impact of a
slowdown in China, anaemic GDP
growth and the shadow of political

instability wreaked by talks of a
Brexit all make for uncomfortable
reading. However, this top-down
view glosses over the fact that at a
corporate level, Europe is home to
businesses that compete globally
and whose fates are not inextricably
intertwined with their continent
of birth. Such companies display

key characteristics that make them
compelling. These firms are cashgenerative and typically operate in
areas with high barriers to entry.
They maintain conservative balance
sheets and are run by proven, wellincentivised management teams
that frequently have a significant
personal stake in the business.

THERE ARE MANY
BUSINESSES THAT, despite
being “born” in Europe, are truly
global players. For example Grifols,
the world leader in blood plasma
products, is listed in Spain, but
makes only 20 per cent of its sales
in Europe. It trades at a discount
to peers Baxter and CSL, with this
valuation gap increasing further if
you purchase the non-voting “B”
shares, which trade at a 25 per cent
discount to the ordinary shares.
Given the exemplary track record
of t H