European markets have had a disappointing year so far, with the Euro Stoxx 50 Index down by some 5% year-to-date. European equities did bounce back from their February lows, driven to a large extent by the European Central Bank’s (ECB) bond purchase program, which has provided excess liquidity to the markets. However, recently, the ECB President has not provided any updates on whether the central bank plans to extend its bond purchase program. European equities have seen a pullback on this development.
However, despite the weak performance of European stocks compared to the U.S., there are some attractive valuations. Given that U.S. equity valuations are close to record high levels, U.S. hedge funds are exploring opportunities in Europe. Here are some European stocks that are trading on the US stock market and on which the smart money investors from our database are collectively bullish on.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
Shire PLC (ADR) (NASDAQ:SHPG)’s improving fundamentals have led to hedge funds raising their bet on the company. At the end of June, 64 of the 749 hedge funds we track held $3.77 billion worth of Shire shares, which translates into 56.70% of Shire’s total outstanding stock. A quarter earlier, 49 funds held $2.57 billion worth of stock. Shire’s stock has had a mixed year so far. While the stock has bounced back following the sell-off seen at the start of this year, it is still down by more than 5% year-to-date and is well below its 52-week high of $231.32. In August, Shire posted its second-quarter results, which included revenue of $2.43 billion, $220 million above the estimates, while EPS of $3.38, topped expectations of $2.29. Recently Shire PLC (ADR) (NASDAQ:SHPG) has extended its agreement with Kamada Ltd. (NASDAQ:KMDA), with the latter producing GLASSIA (Alpha-1 Proteinase Inhibitor) through 2020. Shire is the exclusive distributor of GLASSIA in the US, Canada, Australia and New Zealand.
The funds from our database amassed different classes of Liberty Global’s stock heading into the third quarter. The most popular was Liberty Global plc- Class C Ordinary Shares (NASDAQ:LILAK), in which 62 funds held $1.16 billion worth of stock at the end of June, significantly higher than 31 funds with stakes worth $458.34 million a quarter earlier. In addition, 60 funds held Liberty Global’s Class C stock and 51 investors owned class A shares. Recently, Liberty Global has entered into a deal with Netflix Inc. (NASDAQ:NFLX), under the terms of which the company will integrate Netflix’s app into its cable systems across more than 30 countries. The agreement will kick-off with Netherlands, where Netflix will be launched on Liberty’s Horizon box. The rollouts will continue through 2017.
Read about two other European stocks that have seen interest from U.S. hedge funds on the next page.