Across the Atlantic, Stocks Look Cheap
Every day that the Dow jumps another 100 points and some random Internet stock goes through the roof, it gets harder to find a bargain in the U.S. stock market.
So if you're trying to rustle up some cheap stocks, you're going to have to head overseas.
Many international markets have trailed the U.S. this year. The S&P 500 is up 9.5% this year, and the Nasdaq has gained almost 20%. Meanwhile, European stocks are down. Asia has been weak from SARS, and Japan is still Japan.Value manager David Herro of the (OAKIX)Oakmark International fund is a good guide for investing abroad -- his fund's three, five and 10-year returns rank in the top 5% of all overseas offerings. In today's column, Herro weighs in on where he's shopping and what he's avoiding.
EuropeOn the surface, Europe doesn't look like such a great place to invest your money. The economies of Germany, Italy and the Netherlands appear headed for recessions. The European Central Bank has been slow to cut interest rates. And some countries -- particularly Germany -- are slow in reforming their rigid labor and social policies that make it tough for companies to lay off workers and cut costs during tough times. But all these worries make this region of the world prime hunting ground for inexpensive stocks. And Oakmark's Herro is taking advantage of the market weakness. "Today we're much heavier in Europe than we were two or three years ago," he says. "Three or four years ago, European blue-chips were prohibitively expensive. But today these stocks are cheap, especially given low inflation. Just look at the top 10 holdings in the fund." Indeed, Oakmark's largest holdings are some of the best-known names in the U.K. and Europe: Ericsson (ERICY), Vivendi Universal (V), GlaxoSmithKline (GSK) and Diageo (DEO). Some of these stocks are sporting dividend yields of 3% and over -- about double the yield on the S&P 500 right now. And if a foreign company's stock also trades here in the U.S., then its dividend is eligible for the new 15% dividend tax rate. That's another thing that makes those yields enticing.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV