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In this article, we discuss the 10 best European companies to invest in. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best European Companies To Invest In.
We prepared the actual contents of this article back in January 2022, when inflation was still relatively under control and the Fed hadn't started its rate hike spree. Global markets and investors were welcoming the massive economic recovery that started after the effects of the pandemic started to wane.
At that time we picked the 10 companies mentioned in this article based on analyst ratings, hedge fund sentiment and fundamentals.
We are publishing this article today because it’s always interesting for the readers to analyze how good the so-called “smart money” and Wall Street analysts are when it comes to stock picking. When we look at the stock picks/sells of hedge funds and analysts in hindsight, we can better analyze their performance and see whether they were right or wrong.
To assess the performance of these stocks, we have mentioned their performance in 2022 through November 27.
At the time of writing we had mentioned analyst ratings for these stocks from famous Wall Street analysts. It’d be interesting for our readers to see how right or wrong were these analysts’ price targets and calls.
But first, let's see our primer we wrote on the European economic situation back in January.
The EU economy is on a recovery track after the COVID-19 pandemic, and the recently lifted government lockdowns resulted in Q2 consumer spending increasing 3.3% from the prior-year quarter. However, short-term growth might be stunted due to soaring energy prices, which can possibly dampen the growth momentum for several small businesses.
The 2021 GDP growth forecast for the European Union came in at 5.1%, but economists are lowering their 2022 growth estimates to 4.4%, due to the Omicron variant threatening the restored economic balance in the third quarter of 2021.
Whereas the information technology, communications, finance, and real estate sectors are poised for growth, supply chain bottlenecks are expected to continue in 2022, making the recovery outlook uncertain. Analysts still expect the Eurozone to surpass pre-pandemic trade activity in the fourth quarter of 2021, despite the Omicron threats.
Some of the most notable European companies include L'Oréal S.A. (OTC:LRLCY), Nestlé S.A. (OTC:NSRGY), and UBS Group AG (NYSE:UBS).
Copyright: wolterk / 123RF Stock Photo
10. Deutsche Lufthansa AG (OTC:DLAKY)
Number of Hedge Fund Holders: N/A
Stock performance YTD through November 27: +12%
Deutsche Lufthansa AG (OTC:DLAKY) is the flagship German carrier, and it is one of the largest European airlines in terms of the number of passengers. Together with its subsidiaries, Deutsche Lufthansa AG (OTC:DLAKY) has one of the largest fleets in the world, with more than 700 aircrafts.
Citi upgraded Deutsche Lufthansa AG (OTC:DLAKY) to Buy from Sell on January 3, with a price target of €7.50, up from €1.43. The analyst believes that several catalysts will help long-haul airlines to outperform short-haul carriers, and Deutsche Lufthansa AG (OTC:DLAKY)’s strong cargo business and the reopening of the Asia-Pacific routes, notably China, resulted in the double upgrade by Citi.
On November 3, Deutsche Lufthansa AG (OTC:DLAKY) reported its Q3 financial results. The company posted a GAAP loss per share of $0.17, exceeding analysts’ estimates by $0.17. Revenue over the period jumped 92.14% year-over-year to $6.05 billion, but missed estimates by $471,760.
9. UBS Group AG (NYSE:UBS)
Number of Hedge Fund Holders: 15
Stock performance YTD through November 27: +2%
UBS Group AG (NYSE:UBS), a Swiss multinational investment bank and financial services corporation, is one of the best European companies to invest in. In the third quarter of 2021, 15 hedge funds monitored by Insider Monkey were long UBS Group AG (NYSE:UBS), with stakes totaling $166.8 million. This is compared to the same number of funds holding stakes worth $176.3 million in UBS Group AG (NYSE:UBS) in the prior quarter.
Announcing its third quarter results on October 26, UBS Group AG (NYSE:UBS) posted GAAP earnings per share of $0.63, exceeding estimates by $0.18. Revenue over the period came in at $9.13 billion, up 2.1% year-over-year, outperforming estimates by $500 million.
UBS Group AG (NYSE:UBS) announced on December 16 that the company is in talks with China Life Insurance Group to establish an asset management joint venture in China. UBS Group AG (NYSE:UBS) would be a majority stakeholder in the business unit, which will make it China's first foreign majority-owned asset management joint venture since the country allowed primary foreign holdings in such partnerships in 2019.
JPMorgan analyst Kian Abouhossein raised the price target on UBS Group AG (NYSE:UBS) to CHF 21 from CHF 20 and kept an Overweight rating on the shares on December 6.
Pzena Investment Management is the largest UBS Group AG (NYSE:UBS) stakeholder as of the third quarter of 2021, holding 6.62 million shares of the company, worth $105.5 million.
8. ABB Ltd (NYSE:ABB)
Number of Hedge Fund Holders: 19
Stock performance YTD through November 27: -14%
Headquartered in Zurich, Switzerland, ABB Ltd (NYSE:ABB) is a company specializing in robotics, power, heavy electrical equipment, and automation technology.
Among the hedge funds being tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management is the largest ABB Ltd (NYSE:ABB) stakeholder as of September 2021, with a $583.8 million position in the company.
Bernstein analyst Nicholas Green on December 7 initiated coverage of ABB Ltd (NYSE:ABB) with an Outperform rating and a CHF 38 price target. The analyst initiated coverage of the European capital goods sector, stating that investors should focus on the "enormous potential of the Fourth Industrial Revolution".
On October 21, ABB Ltd (NYSE:ABB) posted its financial results for the quarter ending September 2021. The company reported a GAAP EPS of $0.32, beating estimates by $0.01. The Q3 revenue equaled $7.03 billion, missing estimates by $368 million.
Overall, 19 hedge funds in the Q3 portfolio of Insider Monkey were bullish on ABB Ltd (NYSE:ABB), with stakes totaling $721.6 million. This is compared to 15 funds in the preceding quarter, holding stakes worth $658 million in ABB Ltd (NYSE:ABB).
Here is what Artisan Partners has to say about ABB Ltd (NYSE:ABB) in its Q2 2021 investor letter:
“ABB is a Swiss-based industrial conglomerate. Last year, new management launched a process to improve performance and focus company resources, and it’s paying off. During the quarter, the company reported terrific results exhibiting improvements over both last year’s depressed figures and over the 2019 revenue and profit run rate. Further, management announced plans to simplify the company’s structure by selling off or separately listing several of the company’s non-core businesses.”
7. Sanofi (NASDAQ:SNY)
Number of Hedge Fund Holders: 19
Stock performance YTD through November 27: -10%
Sanofi (NASDAQ:SNY) is a French multinational healthcare corporation based in Paris, and it is one of the largest global pharmaceutical companies. The therapeutic focus areas of Sanofi (NASDAQ:SNY) include cardiovascular, central nervous system, diabetes, internal medicine, oncology, and thrombosis. The company is also a manufacturer of vaccines.
HSBC analyst Steve McGarry upgraded Sanofi (NASDAQ:SNY) to Buy from Hold on November 1, with a price target of €100, up from €89. The company’s third quarter results reflect increased operating leverage that could drive margins up by 4% by the end of 2025.
One of Sanofi (NASDAQ:SNY)’s leading stakeholders from Q3 2021 is Stephen Dubois’ Camber Capital Management, with 3 million shares worth $144.6 million. Overall, 19 hedge funds in the third quarter database of Insider Monkey reported owning stakes worth $1.28 billion in Sanofi (NASDAQ:SNY).
Here is what Dodge & Cox Funds has to say about Sanofi (NASDAQ:SNY) in its Q3 2021 investor letter:
“Sanofi (3.5% position) is a diversified, global pharmaceuticals company with leading positions in vaccines, consumer health products, rare diseases, and emerging markets. Despite a favorable business mix, Sanofi has underperformed its peers in new product development, commercial execution, and profit growth. A new management team, recruited in 2018-19, has made progress turning the company around. Its drug pipeline is improving, targets for higher margins are being met, and earnings per share are growing. Sanofi also pays a 4% dividend yield, maintains a strong balance sheet, and has relatively low exposure to potential pressures from U.S. drug pricing.”
6. TotalEnergies SE (NYSE:TTE)
Number of Hedge Fund Holders: 16
Stock performance YTD through November 27: +18%
TotalEnergies SE (NYSE:TTE), a French multinational supermajor oil and gas company, is one of the best European stocks to invest in. TotalEnergies SE (NYSE:TTE) reported its Q3 results on October 28, posting earnings per share of $1.76, outperforming estimates by $0.15.
Deutsche Bank analyst James Hubbard on December 3 raised the price target on TotalEnergies SE (NYSE:TTE) to €53.50 from €48.30 and kept a Buy rating on the shares.
On December 20, TotalEnergies SE (NYSE:TTE) announced that it is developing solar farms with a power capacity of 160 megawatts and energy storage with 340 megawatt-hours of capacity in New Caledonia. This project will deliver electricity through a renewable power purchase agreement over a 25-year period for the state’s mining and metallurgy company, namely Prony Resources New Caledonia.
Among the hedge funds tracked by Insider Monkey, 16 funds in the third quarter were bullish on TotalEnergies SE (NYSE:TTE), with stakes equaling $1.39 billion. Arrowstreet Capital, one of the leading TotalEnergies SE (NYSE:TTE) stakeholders, boosted its position in the company by 5442% in Q3 2021, with 1.45 million shares worth $69.5 million.
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Disclosure: None. 10 Best European Companies To Invest In is originally published on Insider Monkey.
