This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Luxenberg: A Surge of Cash Into European Funds

NEW YORK ( TheStreet) -- After struggling for years, European stocks are beginning to recover. This year iShares Europe (IEV) rose 19.5%. Investors have taken notice. Vanguard FTSE Europe ETF (VGK) attracted inflows of $6 billion in 2013, a large sum for an ETF with $12.4 billion in assets. A total of $3.7 billion flowed into iShares MSCI EMU (EZU), which has $6.6 billion in assets.

Positive news triggered the rally. The eurozone's GDP grew 0.3% in the second quarter of 2013, an indication that the protracted recession had ended. Now the European Union projects that GDP will grow 1.1% in 2014. While the recovery remains fragile, there is good reason to think that the rebound can continue, says Shep Perkins, portfolio manager of Putnam Global Equity (PEQUX), a mutual fund. In Spain and some other countries, the unemployment rate has begun to fall. "The unemployment problem is still horrendous, but consumer confidence is starting to recover from a low level," he says.

Perkins says that European corporate profits are still 40% below the peak reached in 2007. But he says that earnings will make up the lost ground because managements have been jolted into restructuring. Before the crisis, many boards of directors tolerated inefficiencies and high labor costs. Faced with financial turmoil, companies have been streamlining operations. Perkins cites the example of Deutsche Post DHL, a German giant that delivers mail and packages. At the height of the euro crisis, the company brought in new management that cut costs and focused on strong businesses. Profit margins increased and the stock climbed. The company should continue improving, Perkins says. "Now that the economy is stabilizing there will be more benefits from restructuring," he says.

With stocks climbing, iShares MSCI EMU has ranked among the top performers, returning 31.8% in the past year. During the same time, Vanguard FTSE Europe returned 26.9%. But most investors who want to bet on the rebound of Europe should stick with the Vanguard fund, says Dennis Hudachek, an ETF analyst for Vanguard provides comprehensive coverage of all developed European countries, he says. The iShares fund focuses on countries that use the euro. "If you stick to the eurozone, you exclude the United Kingdom, Switzerland, and Sweden -- and those countries account for about half the total market capitalization of Europe," Hudachek says.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IEV $39.79 -2.02%
VGK $49.26 -2.01%
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs