Overblown Fears: Eurocentric Companies Being Snapped Up by the Smart Money

Last week's doomsday headlines, heralding Europe's economic Armageddon and the demise of its currency, circulated negative sentiment around the continent far and wide. Concern over Spain, which seems to be showing signs of infection by the sovereign debt crisis, remains heightened -- there's a good deal of doubt that Europe's bailout fund could cover the collapse of its fourth-largest economy, an outcome that could hasten the end for the euro.

But perhaps things aren't so hopeless as they've been made out to be.

Deutsche Bundesbank President Axel Weber publicly declared these fears to be exaggerated, reassuring that the rescue fund is indeed deep enough to cushion the economic blow, come what may.

A number of investors would appear to agree: The Stoxx Europe 600 Index rose substantially on the reveal of Ireland's deficit-cutting plan. National benchmark indices rose in 13 Western European markets, including the United Kingdom, Germany, and France. And while Irish banks continued to slump last week, European real estate shares soared, as did basic resources.

As Pioneer Investments KGmbH's Markus Steinbeis sees it, "the main cause for concern is the debt crisis in peripheral Europe, but overall the fundamental healthiness of the global economy is not affected at all," so "there's no reason to be overly concerned about a big correction."

So while yes, the situation is dire, excess pessimism isn't always any better than blind optimism. After all, a savvy investor is greedy when others are fearful -- or so the saying goes.

The following is a list of U.S. companies with a significant exposure to Europe. All of these stocks have seen significant institutional inflows over the last three months. Institutions have far more time and resources to devote to due diligence than your average retail investor -- so you may want to pay attention to where they're placing trades.

The smart money seems to think European fears are overblown for these stocks ... what do you think? (Click here to access free, interactive tools to analyze these ideas.)

Institutional data sourced from Reuters. The list has been sorted by the change in institutional ownership over the last three months. For each stock, we'll also list the percentage of sales that originate from Europe, the Middle East and Africa (EMEA). For most of these companies, the largest portion of EMEA sales originates from Europe.

Company

% of Annual Sales From EMEA

Shares Held by Inst. Investors Today

Shares Held by Inst. Investors 3 Months Ago

% Change in Inst. Ownership

Aon Corporation (NYSE: AON  )

43%

257,574,955

221,418,864

16.33%

American International Group (NYSE: AIG  )

37%

117,607,635

107,165,287

9.74%

Apache (NYSE: APA  )

46%

320,675,637

294,258,373

8.98%

Schlumberger Limited (NYSE: SLB  )

32%

1,055,159,191

972,690,780

8.48%

Ford Motor (NYSE: F  )

32%

2,241,569,794

2,104,042,008

6.54%

XL Group (NYSE: XL  )

43%

318,571,846

299,376,783

6.41%

Interactive Chart: Press Play to see how analyst ratings have changed for all the stocks mentioned above.


Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

Ford Motor is a Motley Fool Stock Advisor recommendation. 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.


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  • Report this Comment On November 30, 2010, at 1:36 PM, Jenny2008 wrote:

    I do believe that a couple of these companies are ripe for a takeover. Especially XL with it's 33 book value and recent upgrade by S&P regarding its risk portfolio. Don't forget.... their CEO may be getting geared up for another senate run and will need his parachute money for his campaign fund!!!

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