By Jeff Reeves, MarketWatch
Investors are increasingly concerned about stock valuations both at home and abroad, as well as feeling fearful that market correction is due.
Now, in addition to myriad concerns about U.S. stocks, there are signs that other markets may be in for trouble — particularly after investors have been so eager to pump up markets such as Europe and China for fear of buying a top in U.S. stocks.
Consider the latest Morningstar Market Observer report, which indicates investors have bid up China stocks so much that stocks there are overvalued by 21.5% on average, and that German stocks are 16.1% overvalued after investors have piled in.
So if you’re afraid that the U.S. is in trouble but missed out on the run-up in China and Europe, where can you turn?
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Well, while some international equities are indeed a bit frothy, the power of the European Central Bank’s version of quantitative easing is hard to overlook. So I think there’s still time to get into select eurozone stocks — particularly those that will benefit most from the current monetary policy, and those that have enough stability to weather any short-term fireworks that could be caused by the continued negotiations over Greek debt and a potential default .
Here are three crash-proof European stocks worth a look:
Sector: Consumer staples
YTD Performance: +8%
Unilever PLC /zigman2/quotes/204685760/composite UL +0.23% has modestly outperformed so far in 2015 despite continued softness in Europe. The reason is partially because of a focus on pantry essentials including Lipton teas and Dove soaps, but also because the global consumer stock has been benefited nicely from a weaker euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0415% .
We have heard a lot in the U.S. about how multinational stocks are harmed by a strong dollar, /zigman2/quotes/210598269/delayed DXY -0.07% creating unfavorable currency exchange rates in overseas markets.
But the flip side of that is true for multinationals on the other side of the equation — namely, a stock like Unilever that is domiciled in an area where the home currency is weak and doing a lot of business in the U.S., where the dollar is strong.
It’s also important to acknowledge the juicy 3.2% dividend Unilever offers now — and the fact that, unlike some European companies, Unilever pays its dividend quarterly instead of once or twice a year.
Sure, revenues are flat and earnings aren’t growing at a breakneck rate. But On April 16, Unilever reported that first-quarter “turnover” — what in the U.S. is called revenue — was up 12.3% over last year, in part thanks to favorable currency rates, but also due to strong emerging-market performance. So looking forward, it’s not only current exchange rates that makes Unilever a buy.
If you’re looking for a defensive play with some income potential, Unilever may be a great way to get into Europe without overpaying — and without exposing yourself to a volatile stock that could see big losses if bad news breaks.