Over the last few weeks, I've spent a lot of time analyzing the ongoing crisis in Europe. Unlike the economy here in the United States, which is improving (however slowly), the economy in Europe continues its downward spiral. Just last week, Spain reported that its unemployment rate rose to 23.6% in February, and data indicate an eighth straight month of contraction in the eurozone's manufacturing sector.
European equity markets have responded in kind, dropping substantially since the middle of March. Although this appears treacherous to the typical retail investor, it's music to the ears of value investors. With this in mind, I've highlighted five German stocks to add to your watchlist, our free stock tracking service here at The Motley Fool.
Siemens is Europe's largest electronics and electrical engineering company, with operations in three sectors: industrial, energy, and health care. As a conglomerate, it rivals General Electric in its penetration into many different industries, including wind power and medical devices. Siemens has annual revenue of nearly $97 billion and is up nearly 5% for the year, yet trades at only 10 times future earnings.
Aixtron is a technology company that specializes in manufacturing metalorganic chemical vapor deposition equipment for the semiconductor industry. When it last reported earnings at the beginning of March, it beat expectations on revenue, coming in at $182 million for the quarter compared to an consensus estimate of $176.9 million. But the company missed badly on earnings per share, coming in with a loss of $0.14 per share compared to analysts' estimates for a $0.11 per share gain. One of the problems with the company that fellow Fool Seth Jayson identified is that its cash conversion cycle has deteriorated over recent quarters. Aixtron has a current market cap of $1.7 billion and annual revenue last year of $800 million. For the year, its stock is up 33%, and it trades for roughly 25 times future earnings.
SAP is a German software company that makes enterprise software to manage business operations and customer relations. When it last reported earnings at the end of January, it booked revenue of $5.84 billion for the quarter, which was 7.4% higher than the prior-year quarter's $5.44 billion. As my Foolish colleague Anders Bylund recently noted, one thing to watch here is how well the company competes in the rapid-growth area of cloud computing. The software company sports a market cap of $80 billion, its stock is up 27% year to date, and it trades for around 14 times future earnings.
4. Elster Group
Elster Group is a leading provider of gas, electricity, and water meters to utilities, distributors, and industrial consumers. It's not a well-known name in the U.S., but it does business around the world, with customers in more than 130 countries. Its market cap comes in at $1.7 billion, and in 2011 it recorded revenue of nearly $2.5 billion. Its stock is up 19% for the year, and it's trading at about 11 times future earnings.
5. Deutsche Bank
As its name suggests, Deutsche Bank is a global banking and financial services company located in Frankfurt. Although European banks are near the epicenter of Europe's sovereign debt crisis and Deutsche Bank in particular was one of now-bankrupt MF Global's two top creditors, analysts believe that Deutsche's exposure to European sovereign debt is under control. Its stock is up 21% for the year, and it's trading for 60% of book value, right around where bank investors like to buy.
Foolish bottom line
Investing in European equities right now is not for the faint of heart. The continent is embroiled in economic malaise and it remains to be seen whether the monetary bloc can even survive the storm. That being said, my favorite of the five companies above is Siemens. Known as Germany's "mini-GE," it's simply a good solid stock to buy and hold. Furthermore, it's trading at its lowest earnings multiple since 2008, pays a 3% dividend yield, and was awarded a coveted five-star ranking in Motley Fool CAPS, our free investing community of over 180,000 investors. For those of you with a less voracious appetite for risk, however, check out the companies identified in The Motley Fool's latest free report: "3 American Companies Set to Dominate the World."
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