European equities should not be overlooked as there are some “jewels amongst the rubble” according to Lazard Asset Management.
Aaron Barnfather, the manager of the firm’s European Alpha fund, says investors misinterpret the region and most recently only focused on “green shoots” reports in America and Britain when Europe is no worse off in terms of opportunities.
“During my career Europe has always traded at a discount, particularly to the US. It is now trading at a bigger discount than it normally does, which is amazing given what’s happened in the UK and US.
“There has been such a shift in the way the world works and
we need time for people to think about what’s changed. As people will want to allocate more cash into equities, I suspect Europe will be a beneficiary of that, more than people perceive.”
Barnfather says there are many firms that have been “unfairly” dragged down with the markets given their quality of earnings and he has been adding these to his portfolio over the past six months.
He says Anheuser Busch is an example of a company trading at an unfair discount: “It took over Budweiser last year and after a very significant recovery it is a global leader in brewing. However, it is currently trading on a P/E [price/earnings ratio] of 12. In the US, Budweiser never traded on a P/E less than 15.”
This is a firm that should never be trading at such a big discount to the underlying valuation, he adds.