Germany, the stronghold of the European Union, just had one of its worst bond auctions ever. Total bids at the auctions came to 3.9 billion EUR vs. 6 billion EUR issued. Has the debt crisis finally spread to the markets of Berlin?
German bond yields typically go lower on risk off days, which makes today's auction a rare event. The low returns of 2% annually over 10 years simply wasn't enough to lure investors who still aren't sure how the debt crisis will play out.
"That meant the central bank had to pick up 39 percent of the 6 billion euros ($8 billion) of debt Germany had hoped to sell after commercial banks bought just 3.644 billion euros of the issue," reports the Huffington Post.
Furthermore, "Bund futures, the euro and European stocks fell after the auction, with Germany's 10-year debt costs rising above equivalent U.S. yields for the first time since early October."
Flee from European bonds
Some are saying that it has been coming to this for a while now. Europe, with all the risk associated with their sovereign debt crisis, has been scaring investors away. Even the Union's strongest member can't maintain investor confidence like it used to.
In general, the fear is that the debt crisis which swept up Greece, Italy, and Spain will begin to drag down the EU powerhouses, like France, Belgium, and Germany. Germany's future becomes especially worrisome as the country seems increasingly likely to underwrite the debt of the eurozone's struggling states.
Germany is seeing less enthusiasm for its debt. As investors begin to flee Europe altogether, many may be wondering how this will effect bonds and stocks back in the United States.
So, which companies stand to benefit from a declining euro?
For ideas, we went back in time, and collected price data on thousands of stocks. We identified the companies that performed best during times of euro weakness.
The time intervals we used for our calculation (i.e., time intervals when the euro declined):
7/14/2008 – 11/17/2008
11/23/2009 – 5/31/2010
4/25/2011 – 10/3/2011
All of the names mentioned below outperformed the market during these three time periods. Of course, past performance is no guarantee of future results, so only use this list as a starting point for your own analysis.
History suggests these companies do well in times of a raffling euro currency. Do you think history will repeat itself?
List sorted by the average alpha vs. the S&P 500 index. (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Eben Esterhuizen, CFA:
1. Dollar Tree
5. O'Reilly Automotive
7. National Beverage
9. Treehouse Foods
10. Schiff Nutrition International
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Price data sourced from Yahoo! Finance.
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