"The time to buy is when there's blood in the streets." Baron Rothschild
Late last year I began talking about how some European stocks were great long-term buys. The story has not changed much. There is still uncertainty with the Euro, overwhelming debt in several nations and quite a few companies with stock prices at depression levels.
One thing that has changed is that strict austerity has been getting voted down. I don't pay much attention to Greece, because in my mind they don't matter much and I have long figured they would renege on as much of their debt as they could. If they keep using the euro, fine, if they don't, we'll see how long it takes for them to crawl back. Much more importantly in my mind is that even in Germany, the likelihood of spending to support growth is getting play.
Over the past month or so, the growing likelihood of central bank and legislative actions which would further water down the euro has led to a relatively stronger dollar. For the American investor, that signals another buying opportunity for certain European stocks.
Unfortunately for most American investors, they are still too scared to invest. I understand that, but it's wrong.
I have heard investors say repeatedly "What if it goes lower?" I am almost to the point of saying "So what if it does?" Too many people are so absorbed with emotions when it comes to their money that they lack any long-term perspective anymore.
The question people who are sitting in cash ought to be asking this summer is, "What if the world doesn't end?" And the corollary question, "What will still be in business in 10 years?"
I am not advocating that people jump in all at once today or try to make trades. What I am saying is that people with large cash and bond fund holdings, really need to start thinking longer term again.
What I believe is coming are two rallies in equities. The first rally will be the "world isn't ending rally." That is, once people realize that things are really getting better a baby step at a time, they will put some money to work. Most of those people will be mid-size investors. This rally is probably due to come soon.
The next rally, after a consolidation phase, will be the "I can't miss it rally." That will be when people paralyzed by fear today, complicate their past mistakes with another mistake. Those investors will pour money into a market that is cresting and catch the full brunt of the correction that follows. Most of those investors will be mutual fund investors.
As I have said before, many large investors � save your doom and gloom crowd � are cherry picking now. Wouldn't you like some cherries?
Some companies I have mentioned in the past are still buys. Among them are, Veolia Environnement VE ,�which has a several solid businesses, including some water related, and has been paring down debt; and France Telecom FTE ,�which continues to become more efficient and expand into developing markets. Both companies pay fat dividends while you wait for the inevitability of the world not ending.
On the energy theme I have been hammering for months, are companies like Total TOT , Royal Dutch Shell RDS.B �and BP BP . All three pay a nice dividend and are approaching autumn 2011 lows.
If you are unable to overcome your fear and buy stock, try something that really isn't as scary as it sounds and sell cash secured puts that are slightly out of the money. You get to collect generous premiums due to the fear that is out there and don't have to buy the stock unless companies you like are even cheaper.
I am going to keep this short since it is Facebook Friday, but folks, it is time to start getting back in. European companies with big dividends and strong businesses are a good place to start. The world is slowly getting better and you have strong dollars to use to buy a better future.
Kirk and clients of Bluemound own shares of Veolia and France Telecom. Neither Kirk nor Bluemound clients plan any transactions in the next 3 trading days. Opinions subject to change at any time without notice
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