BOSTON ( TheStreet) -- David Marcus, manager of the Evermore Global Value Fund (EVGBX), says alarming news stories about Europe's debt debacle -- including a possible default in Greece -- is creating the biggest bargains in two decades.
As a global value-fund manager, Marcus has put his focus squarely on European stocks, as many stock indices -- from Germany to France to Italy -- are mired in bear markets after plunging on sovereign bankruptcy fears plaguing the continent.
|Old Mutual PLC (U.K.)|
"We're in a world of headline readers, and they see it's pretty bad out there," Marcus says. "What our investors are paying us to do is sift past the headlines and dig deep. There are a lot of problems in Europe. We're finding that while some things are worse than the headlines, there are more opportunities there than I've seen in 20 years."As Greece teeters on the brink of a possible default, the ripple effects would rock every country in the Eurozone, from weaker countries in the south (Italy and Spain) to the powerhouses up north (Germany and the U.K.). French banks such as Societe Generale have already been downgraded by credit-ratings agencies on potential exposure to the crisis. "You want to go to where the crisis is," Marcus says. "There is a crisis everywhere, from the U.S. to Japan. But the biggest one of all is Europe. When investors are in panic mode, they're dumping things indiscriminately. They don't care about valuation. It's as if somebody yelled 'fire' in the continent, and everyone is running out. And we don't have to run in. We're taking our time to walk in and look at among the rubble for gems." Marcus has over 20 years' experience in the industry, even serving for a time as a restructuring expert, so he knows the patience and discipline required when dealing with investments in a beaten-down environment. Marcus takes a private-equity approach in picking stocks. "We're more cynical because we've seen these things in the past," Marcus says. "We come at it with a better view. There are a lot of value investors out there who buy cheap for cheap's sake. We have no interest in that. We want to know that there is a change of some sort that will bring the value out." Started in January 2010, the Evermore Global Value Fund has underperformed the benchmark MSCI All Country World Index in nearly every time span, but Marcus isn't apologizing for the weak performance yet. "Why are we down? We're investing in markets that are tough right now. Europe is truly a special situation," Marcus says. "Our stuff won't work overnight. These restructuring cases take time. We have to plant our seeds now while everyone is still freaking out. History has proven repeatedly that when you buy in the middle of a crisis, your biggest regret is that you didn't buy more." Marcus says he has found "some compelling investments that are stupid cheap" using his special-situation focus. While the crisis has hammered the share prices of many European companies and spooked investors, the Evermore Global Value Fund has been snatching up companies that are making the sovereign crisis a benefit rather than a hindrance. "Across Europe, companies are taking advantage of the crisis," Marcus says. "Companies are substantially smarter than the countries they are in. They're finding ways to take advantage of the crisis to prepare their businesses for the next generation. Companies are accelerating negotiations with unions. They're consolidating facilities. Boards are more aggressive with management." Not everything in Europe is jumping out as a screaming buy, as Marcus is using a conservative approach rather than rushing in headlong. Marcus says he assumes Greece will default as part of his investment thesis. "If it doesn't happen, there is upside to my thesis. I'm still getting stocks that are cheap under 5 times earnings," he says. The fund has avoided every European bank stock, based on the assumption Greece will default as the worst-case scenario. Despite that threat, Marcus likely wouldn't be purchasing European banks because of their opaqueness. "Over the past 20 years of investing in Europe, I can't remember the last time I bought a bank stock," he says. "I've always stayed away from the banks in Europe. We used to say they were black holes. We couldn't figure out how they earned their money. We couldn't really understand what was going on. Despite the effort for more transparency, I don't think today is much different." However, the Evermore Global Value Fund is finding value in European industrials, media and insurance companies. The following pages detail some of Marcus' favorite stocks from across the Atlantic.
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