The message from above chart is simple. If you’re looking for value stocks, Europe is a much better hunting ground right now than the US.The rise of the ‘Magnificent Seven’ in the US has created something of a slipstream effect that has dragged along many of the 493 other (less magnificent) stocks in the S&P 500 and pumped up their valuations. Europe has its own version of the Magnificent Seven, dubbed the ‘Seven Wonders’, comprising Hermès, Novo Nordisk, Siemens, LVMH, SAP, ASML and Schneider Electric. But while those seven have, like their US counterparts, outperformed the broader market, their success has not rubbed off on other stocks to anything like the same extent.The result is the S&P 500 has far more stocks on a price-to-earnings (PE) ratio above 30 than the MSCI Europe index. By contrast, the latter has a much bigger pool of stocks with PE ratios lower than 10.Of course, trading on a low PE ratio does not necessarily mean a stock is good value. Earnings could be cyclically overinflated, cash conversion might be poor, the balance sheet could be a mess. But with nearly 200 companies trading on less than 15 times earnings you can find a healthy number that are not only cheap but have good fundamentals. They also look well positioned for a period in which monetary policy is expected to remain relatively tight.These include the cheaper consumer cyclicals, which directly benefit from rising wages, as do some consumer staples in the defensive space. Several financial names also look cheap and should maintain their profitability as long as interest rates don’t fall. There are also a few tech stocks that are starting to see accelerating earnings-per-share growth and which are still on reasonable valuations.It may feel nice to own stocks that all the influencers herald as ‘magnificent’ or ‘wonderful’. The real gems though are found elsewhere.Want to search and invest in related funds?Open the WeLab Bank App and click【Featured Funds > Equity > Europe Equity】to find out more!Do not want to miss our latest product offerings, promotions and wealth management tips? Visit the App and proceed to【Settings > Marketing preferences】to accept receiving our marketing communications as well!Importance NoticeThis document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons. The investment products or services mentioned in this webpage are not equivalent to, nor should it be treated as a substitute for, time deposit, and are not protected by the Deposit Protection Scheme in Hong Kong.The information or opinion presented has been developed internally and/or taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse such information or opinion.Investment involves risks. The price of an investment fund unit may go up as well as down and the investment funds may become valueless. Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.Fidelity’s Commentary: Europe, not the US, is the place to look for value stocks
Europe has a far bigger pool of stocks that are currently trading on attractive multiples than the US.The message from above chart is simple. If you’re looking for value stocks, Europe is a much better hunting ground right now than the US.The rise of the ‘Magnificent Seven’ in the US has created something of a slipstream effect that has dragged along many of the 493 other (less magnificent) stocks in the S&P 500 and pumped up their valuations. Europe has its own version of the Magnificent Seven, dubbed the ‘Seven Wonders’, comprising Hermès, Novo Nordisk, Siemens, LVMH, SAP, ASML and Schneider Electric. But while those seven have, like their US counterparts, outperformed the broader market, their success has not rubbed off on other stocks to anything like the same extent.The result is the S&P 500 has far more stocks on a price-to-earnings (PE) ratio above 30 than the MSCI Europe index. By contrast, the latter has a much bigger pool of stocks with PE ratios lower than 10.Of course, trading on a low PE ratio does not necessarily mean a stock is good value. Earnings could be cyclically overinflated, cash conversion might be poor, the balance sheet could be a mess. But with nearly 200 companies trading on less than 15 times earnings you can find a healthy number that are not only cheap but have good fundamentals. They also look well positioned for a period in which monetary policy is expected to remain relatively tight.These include the cheaper consumer cyclicals, which directly benefit from rising wages, as do some consumer staples in the defensive space. Several financial names also look cheap and should maintain their profitability as long as interest rates don’t fall. There are also a few tech stocks that are starting to see accelerating earnings-per-share growth and which are still on reasonable valuations.It may feel nice to own stocks that all the influencers herald as ‘magnificent’ or ‘wonderful’. The real gems though are found elsewhere.Want to search and invest in related funds?Open the WeLab Bank App and click【Featured Funds > Equity > Europe Equity】to find out more!Do not want to miss our latest product offerings, promotions and wealth management tips? Visit the App and proceed to【Settings > Marketing preferences】to accept receiving our marketing communications as well!Importance NoticeThis document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons. The investment products or services mentioned in this webpage are not equivalent to, nor should it be treated as a substitute for, time deposit, and are not protected by the Deposit Protection Scheme in Hong Kong.The information or opinion presented has been developed internally and/or taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse such information or opinion.Investment involves risks. The price of an investment fund unit may go up as well as down and the investment funds may become valueless. Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.
The message from above chart is simple. If you’re looking for value stocks, Europe is a much better hunting ground right now than the US.The rise of the ‘Magnificent Seven’ in the US has created something of a slipstream effect that has dragged along many of the 493 other (less magnificent) stocks in the S&P 500 and pumped up their valuations. Europe has its own version of the Magnificent Seven, dubbed the ‘Seven Wonders’, comprising Hermès, Novo Nordisk, Siemens, LVMH, SAP, ASML and Schneider Electric. But while those seven have, like their US counterparts, outperformed the broader market, their success has not rubbed off on other stocks to anything like the same extent.The result is the S&P 500 has far more stocks on a price-to-earnings (PE) ratio above 30 than the MSCI Europe index. By contrast, the latter has a much bigger pool of stocks with PE ratios lower than 10.Of course, trading on a low PE ratio does not necessarily mean a stock is good value. Earnings could be cyclically overinflated, cash conversion might be poor, the balance sheet could be a mess. But with nearly 200 companies trading on less than 15 times earnings you can find a healthy number that are not only cheap but have good fundamentals. They also look well positioned for a period in which monetary policy is expected to remain relatively tight.These include the cheaper consumer cyclicals, which directly benefit from rising wages, as do some consumer staples in the defensive space. Several financial names also look cheap and should maintain their profitability as long as interest rates don’t fall. There are also a few tech stocks that are starting to see accelerating earnings-per-share growth and which are still on reasonable valuations.It may feel nice to own stocks that all the influencers herald as ‘magnificent’ or ‘wonderful’. The real gems though are found elsewhere.Want to search and invest in related funds?Open the WeLab Bank App and click【Featured Funds > Equity > Europe Equity】to find out more!Do not want to miss our latest product offerings, promotions and wealth management tips? Visit the App and proceed to【Settings > Marketing preferences】to accept receiving our marketing communications as well!Importance NoticeThis document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons. The investment products or services mentioned in this webpage are not equivalent to, nor should it be treated as a substitute for, time deposit, and are not protected by the Deposit Protection Scheme in Hong Kong.The information or opinion presented has been developed internally and/or taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse such information or opinion.Investment involves risks. The price of an investment fund unit may go up as well as down and the investment funds may become valueless. Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.