European Stocks: Profit From the Recovery in an Easy, Low-Cost Way

Some European stocks are offering hefty dividends, too.

Jan 31, 2014 at 12:18PM

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some European stocks to your portfolio but don't have the time or expertise to handpick a few, the SPDR STOXX Europe 50 ETF (NYSEMKT:FEU) could save you a lot of trouble. Instead of trying to figure out which European stocks will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual-fund cousins. This ETF, focused on European stocks, sports a relatively low expense ratio -- an annual fee -- of 0.29%.

This European-stocks ETF underperformed its benchmark over the past five and 10 years, but topped it over the past three. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why European stocks?
It's smart to diversify your holdings not only by market size and industry but also geographically. If the U.S. economy stalls or slides, other economies may still be performing well, so European stocks could help offset losses in your portfolio.

More than a handful of European stocks had strong performances over the past year. Vodafone Group (NASDAQ:VOD) surged 43% and yields 3%. With shareholders approving the sale of Vodafone's remaining stake in Verizon Wireless to Verizon for $130 billion, Vodafone's dividend is now sturdier and likely to rise. Vodafone is investing in India, too. Bears don't like Vodafone's shrinking free cash flow. There has long been speculation that AT&T might buy Vodafone, but AT&T has denied such plans. The U.K.-based telecom titan offers a handy way to profit from Europe's rebounding economy, and it's making further investments in Europe, as well.

Banco Bilbao Vizcaya Argentaria (NYSE:BBVA) jumped 28%. It's Spain's second-largest bank and one of world's biggest banks. Spain's rocky economy presents challenges for BBVA, but it can offset that with operations in other regions, such as Turkey and Texas (where it owns Compass Bank). In a conference call following second-quarter earnings, management noted, "[H]ere in Spain, the rate of recovery is being slow and will continue to be slow over the next few months," adding that it would cut its upcoming dividend and also pay more of its dividend in shares in the future.

Other European stocks didn't do quite as well over the last year but could see their fortunes change in the coming years. Banco Santander (NYSE:SAN) gained 20% and recently yielded about 7.3%. This Spain-based bank is also geographically diversified, with substantial operations in faster-growing Latin America and South America. Its fourth quarter featured profits up 90%, in large part due to Latin America. Overall, though, Banco Santander has been hurting, with profits well below where they were several years ago. Still, management sees much brighter days ahead, and many, such as Fool U.K. commentator Royston Wild, see Banco Santander as rather attractive.

BP (NYSE:BP) advanced 12% and yields 4.8%. It has long been depressed due to sizable (and not yet fully known) penalties and settlements from its role in the massive Deepwater Horizon oil spill. As my colleague Tyler Crowe explained: "BP has spent approximately $42 billion for everything related to the spill, and it is on the hook for another potential $55 billion for charges from both the Clean Water Act and local and state government claims." BP has sold many assets to generate needed funds, but it has also kept many promising exploration projects, some of which have already yielded discoveries. Major legal and financial worries aside, bulls like the company's focus on energy efficiency, though rising drilling costs are a concern. Some reasonably don't think its risks are worth its potential rewards. BP reports its full-year results on Feb. 4.

The big picture
If you're interested in adding some European stocks to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

The No. 1 Way to Lose Your Wealth Without Even Knowing It
You’ve fought hard to build wealth for you and your family. Yet one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it’s too late!

Selena Maranjian, whom you can follow on Twitter, owns shares of Verizon Communications. The Motley Fool recommends Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers