MANAGING WEALTH: Europe an option if breaking from herd

SOME of the greatest investors of our time are natural contrarians, buying assets where others fear to tread.
The view is that by going against the herd they are getting bargain prices. When the assets return to fair value, they pocket the gain and move on to the next undervalued play.
You couldn't have opened a newspaper in the last few months without seeing some commentary on the debt problems of Greece and the Eurozone. European sharemarkets were in freefall, some dropping as much as 30 per cent.
A natural contrarian would be drawn to this area because of the potential for good bargains.
 Common sense tells us the majority of European companies' profits are largely unaffected in the long-term by government debt.
In fact a lot of the revenues sourced by European companies come from countries outside the Eurozone.
How does one think about investing in the European markets? An obvious starting point is to focus on the stronger economies that do not have debt problems today, such as Germany, France and the United Kingdom.
These countries also have reasonable expectations of growth as the global economy slowly grinds its way out of the harshest recession in 70 years.
The price paid for the earnings of each country's respective companies, otherwise known as the P/E multiple, reveal that France has a P/E of 10, Germany 11 and the United Kingdom 10. These ratios are historically quite low and reflective of sharemarkets that are generally undervalued.
A passive investor can gain exposure to these markets by investing in an index type fund.
Exchange traded funds give you an exposure to the sharemarket index of a respective country.
For example, the ishares Dax will give you exposure to the German index. This index includes well-known companies such as Siemens, Deutsche Bank, and Daimler.
A more active investor may prefer to have direct exposure to individual companies and a well-resourced adviser will have the ability to buy directly into many of these markets.
This gives you the opportunity to invest in household brands names, which are listed on the FTSE, the United Kingdom stock exchange.
While investing offshore may not be for everyone, it does open the doors to those investors seeking companies that have the ability to deliver long-term capital gains.
On the other hand, good quality New Zealand companies for the most part deliver solid dividend yields and nothing beats getting a dividend in the bank every six months.
A combination of the two may meet investors' expectations over the long term.
* Disclaimer: The above comments are for general information purposes only. This article is not intended to constitute investment advice under the Securities Markets Act 1988. If you wish to receive specific investment advice, please contact your investment adviser. Disclosure Statements for Forsyth Barr and any of its investment advisers are available on request and free of charge.
Andrew Davis is a qualified investment adviser with Forsyth Barr in Tauranga. He can be contacted on phone: 0800367227 or email: andrew.davis@forbar.co.nz