You have a rare opportunity with European stocks.
It’s your chance to step back in time and take advantage of a valuable investment if you missed it the first time.
At the beginning of the year, I explained why Europe was the place to invest for 2015. Europe was set to outperform the U.S. stock market with flying colors. While Janet Yellen and the Fed heads prepared to increase interest rates for first time since 2006, Mario Draghi & Co. proposed another round of massive quantitative easing, and low interest rates for years to come.
As it turns out, I was spot on the money. The European REIT I recommended is now up 15.6%, even after the continent experienced a correction. For comparison, the Dow Jones Industrial Average is down 0.4% year-to-date.
Clearly betting on European stocks has been the right call.
And thanks to Greece’s latest drama, today is your second chance at that rally…
Late last night, Greece and the euro zone came to a last-minute agreement on a third bailout for the debt-stricken country — but the damage to the stock market has already been done. Over the past three months, the main European exchanges have plunged more than 10%. Stock markets around the world took a hit as Greece and the euro zone struggled to reach a deal, with the Dow posting its biggest loss since 2013, France and Germany posting their biggest loss since 2011, and the Shanghai market tumbling 3.3%.
Despite the steep drop the European stocks encountered, they’re not down for long. They’ve rebounded over the past week on the hopes of a last-minute deal between Greece and its creditors — a hope that’s paid off.
With Greece’s deal, and the market about to rebound, European stocks remain a bargain, especially compared to where they were trading three months ago and compared to overpriced U.S. stocks. Considering that European stocks are set to outperform American markets over the next decade, now is the time to jump back into Europe.
So now is your chance to repeat the call I started the year off with — buy Europe.
To do that, I’m looking at Allianz (XETRA: ALV) — a leading property-casualty and life insurance company located in Germany.
Allianz shares are up 7% since the beginning of the year, but its shares are poised to surge much higher.
Before I get into Allianz, let me explain how it’s been affected by Greece’s financial crisis and how it will benefit from the market’s bounce back.
European Stocks’ Outperformance
Shares in Allianz were off to a hot start this year, jumping 24% in just four months.
But once the situation in Greece started to unravel, it was a completely different story. As Greece went back and forth with its creditors, refusing to implement harsher austerity measures, European stocks took a hit. As a result, over the past three months shares in Allianz tumbled more than 16%.
But now that Greece has struck a deal with the euro zone (as Jeff predicted), European stocks are going back to what they were doing before this Greek drama unfolded — outperforming U.S. stocks.
Other than suffering a stock market correction from Greece, Europe (and its stocks) will have no hangover.
The European Central Bank (ECB) is maintaining its version of quantitative easing, which is going to keep the continent’s historically low yields even lower, for longer, than the U.S.
So investors are going to be forced to find income in the stock market — which is exactly what has bolstered the U.S. stock market for the past six years.
You can benefit from Europe’s hunt for yield through Allianz.
Europe’s Answer to Finding Yield
Always keeping income in mind, I look to lock in higher yields during temporary market corrections (as the Greek crisis has proven to be). Allianz allows us to do just that.
The stock offers a generous yield of 4.7%. And even though 4.7% sounds strong by itself, it also represents the stock’s highest yield since 2012. Better yet, Allianz has a history of paying a steady dividend: It has only reduced its dividend once since 1997, which was because of the global financial crisis.
This is the kind of dividend history that tells me the strength of a company’s underlying operations — these cash checks are a true display of substantial cash flows.
In short, Greece’s crisis is giving you the chance to turn back time and play Europe as if it were the start of the year — which is when Allianz surged 24%.
Allianz will pick up where it left off, and should hand investors a similar return by the end of the year. The stock is only fetching 10.58 times its current earnings, compared to 9.98 at the beginning of the year, so it will be a favorite among those seeking yield in undervalued stocks.
Editor, Pure Income