Lately, European markets keep giving fund manager David Marcus what he calls "gifts". Stocks keep getting cheaper every day as Europe grapples with its financial crisis.
"I'm like, enough with the gifts already," says the manager of the Evermore European Value Fund.
Surely, these are interesting times to be a European fund manager. Some of the most distressed European markets have come close to retesting their lows from the 2008-09 credit crisis.
Yet while investors pull money out of equities and run full-tilt away from risk, managers such as Marcus say the buying opportunities in Europe are among the best they've seen.
Marcus is a dyed-in-the-wool value investor, having previously worked for 14 years as an analyst and manager at famed value shop Mutual Series. He's had a tough time attracting assets to his fund, which opened in January of 2010.
Year to date it's down 22 per cent and has only $10 million in assets. Yet Marcus remains optimistic: "In the long run you get some of your best investment ideas in the middle of a crisis."
Just look at Italy, he says. On September 23 the iShares MSCI Italy Index ETF, which tracks the country's benchmark index, fell to $10.88 a share, almost half its $20 price this April and just shy of its all-time low of $10.03 on March 2, 2009.
Marcus says he's seeing extraordinary values in companies such as Exor SpA, parent company of automaker Fiat. "The stock is down 40 per cent this year and trades for less than five times forward 12-month earnings," he says.
And it isn't just Italy. The average foreign stock in the MSCI EAFE index has a price-to-book value of 1.3, almost half that of the S&P 500's 2.5.
Although Europe has serious fiscal problems, there are stark differences between today's crisis and 2008's. Back then the problems were in the private sector; today they're in the public sphere. It's the debt of Portugal, Italy, Ireland, Greece and Spain at risk of default, not the debt of corporations.
"I have example after example of companies in demonstrably better financial shape today than they were in 2008 and yet they're trading at their 2008-2009 lows," says Sarah Ketterer, manager of the Causeway International Value Fund.
"The most extreme ones are in the European financial services sector."
Ketterer has 6 per cent of her portfolio in European banks such as BNP Paribas and Barclays. Another 6 per cent is in insurers such as AXA SA and Zurich Financial Services.
Investor worries about banks' holdings of sovereign debt are overblown, she says. Even pricing in an almost complete wipeout of Greece's and Portugal's bonds, she says France's BNP has so little exposure of that kind of distressed debt that its stock would fall about 20 per cent.
She thinks the potential upside for the company, in the more likely event of a bailout, is in excess of 150 per cent.
Ketterer thinks concerns about a potential dissolution of the European Union because of its fiscal problems are unfounded. "The meltdown situation isn't even something we're modelling for our portfolios," she says.
"The costs for a eurozone disintegration are common knowledge among the region's leaders and they realise it would be much too high."
Any country leaving or being kicked out of the EU would face default on its euro denominated debt, a devalued currency and flagging trade.
According to a recent report by UBS economist Stephane Deo, Euro Break Up - The Consequences, the cost of a weak country leaving the EU would be €9500 to €11,500 per person in the exiting country in the first year, with an estimated €3000 to €4000 per capita cost in subsequent years.
Even if the EU were to dissolve, many European companies would continue to prosper, as much of their business is either outside the eurozone or has little to do with the health of local governments.
Lewis Braham is a freelance writer based in Pittsburgh.