European markets rallied 0.5 percent this morning on economic data confirming Europe's recovery:
So, there are three pieces of hard evidence that point to an economic rebound in Europe. In addition, two U.S.-based strategists joined us on-air this week to make the case for investing in Europe. One is Jay Pelosky, who built the emerging-markets business for Morgan Stanley and now runs his own firm (J2Z Advisors). He says the European Central Bank has more flexibility to lower rates and more inclination to supply capital than the taper-talking Fed. The other is Anne Lester of JPMorgan Asset Management, who argues that European stocks are better value than the U.S. given the 30 percent discount measured by cyclically-adjusted P/E ratios (that is, price divided by 10-year average earnings adjusted for inflation).
Therefore, today we're screening for quality in Europe: profitable companies growing their businesses and trading at a discount to the U.S.
Fifteen companies in the Euro Stoxx 600 made the cut, 11 of which are U.K.-based. We would like to see broader participation, but the U.K. is farther ahead in its recovery than continental Europe (three consecutive quarters of expansion vs two).
P.S. It's all about screening for opportunity, and by easing the growth assumption to 7 percent, six additional names come up, shared exclusively with blog readers: Aryzta AG (ARYN SW), Christian Dior SA (CDI FP), Daimler AG (DAI GR), EasyJet Plc (EZJ LN), Pirelli & Co. (PC IM), Scheider Electric SA (SU FP).