Europe is still going through a tough recession. While Germany stays strong thanks to its unparalleled industrial power, countries such as Spain and Italy remain under pressure. That said, investing has a lot to do with expectations. As professor Michael Mauboussin (who is the head of global financial strategies at Credit Suisse) used to say in his classes, investment success equals reality minus expectations. And expectations for Europe are, indeed, remarkably low. Let’s see three European companies that might help your portfolio going forward.
A top global sporting company growing earnings at full speed
Adidas is growing its top-line while ameliorating its earnings faster than ever. The company has an attractive margin expansion story which I expect to fuel an 18% EPS Compounded Annual Growth Rate (CAGR) until 2015 – versus NIKE, Inc. (NYSE:NKE)‘s 12%. Besides, the Adidas brand is having great momentum in emerging economies like Russia and China, where consumers elected Adidas as the top brand (ahead of Nike).
One airline to look at
Cutting costs could significantly improve earnings
BT Group plc (ADR) (NYSE:BT) is still one of the least efficient incumbent telecom companies in Europe, and the market seems to be under-appreciating the significant cost-cutting opportunities the company could benefit from. On the other hand, BT Group plc (ADR) (NYSE:BT) is growing fast in the high-margin UK high-speed broadband market, which is allowing the company ameliorate its Revenue Per Line (RPL). As a matter of fact, fiber adds accelerated again during the first quarter of the year to 211,000 retail fiber subscribers, versus 200,000 during the fourth quarter of 2012.