Upshot of European debt dilemma? Good value bets

The sovereign-debt crisis in Europe is resulting in huge opportunities for value investors, speakers told attendees at Morningstar Inc.’s 22nd annual Investment Conference in Chicago last week. “In the European markets, many of the non-financial companies have been painted with the same negative-valuation brush,” said Philippe Brugere-Trelat, executive vice president of Franklin Mutual Series, part of Franklin Templeton Investments, said as part of a panel on global investing. “There are a great number of European companies that are not too exposed to Europe.” For example, many exporters throughout Europe have significant earnings and sales from other parts of the world, he said. “They have very good balance sheets and look pretty good trading at very low multiples because no one likes Europe,” Mr. Brugere-Trelat said. Daniel O’Keefe, managing director at Artisan Partners LP, said he is also looking for values in Europe. “There are a lot of interesting opportunities in Europe,” he said. The Spanish telephone company Telefónica SA Ticker:(TEF) is a stable company that is trading seven to eight times earnings, Mr. O’Keefe said on the panel. There are also some great equity opportunities domestically, Mr. O’Keefe said. “People don’t believe businesses can grow,” he said. For example, American Express Co. Ticker:(AXP). and MasterCard Inc. Ticker:(MA) both are good companies with “bulletproof balance sheets” and are good investments, he said. “American Express is trading at 11 times earnings, and MasterCard is trading 15 times earnings,” he said. During a separate panel discussion last week on dividend investing, portfolio managers discussed opportunities in the property and casualty, technology and energy sectors. Property-casualty providers such as The Travelers Cos. Inc. Ticker:(TRV), which just raised its dividend, is a particularly attractive investment, Hersh Cohen, senior portfolio manager and chief investment officer at ClearBridge Advisors, a subsidiary of Legg Mason Inc., said during the panel discussion. The Chubb Corp. Ticker:(CB)and Ace Ltd. Ticker:(ACE) are also worth considering, said Don Kilbride, an equity portfolio manager with Wellington Management Co. LLP. “I agree that property and casualty has the most prospects for dividend growth among the financials,” Mr. Kilbride said In the wake of the BP PLC oil spill and with pending regulation, Mr. Kilbride believes that oilers such as Exxon Mobil Corp. Ticker:(XOM), ConocoPhillips Co. Ticker:(COP) and Chevron Corp. Ticker:(CVX) will all continue to be able to pay dividends. “I still think [the oil sector is] a reasonable place to be,” he said. Mr. Kilbride and Mr. Cohen both cited technology companies as an emerging area where they see opportunities for dividend payouts. “We bought Intel Corp. Ticker:(INTC) for the first time in 15 years,” Mr. Cohen said. “It’s a cash machine, and we think it has enormous potential growth in its dividend, as does Microsoft Corp. Ticker:(MSFT).”