Fund Guru's European Trio

08/22/2013 10:00 am EST


Walter Frank


While not out of the woods yet, some economic signs are pointing to better times ahead for the European Union, notes fund specialist Walter Frank, editor of MoneyLetter.

So amid this optimism, we are highlighting three European-focused funds to keep an eye on for potential investment.

Portfolio manager Stephen Peak at Henderson European Focus (HFEAX) follows a "growth at a reasonable price" philosophy.

Fundamental research drives bottom-up stock selection, which, in turn, drives country and industry sector allocations.

The resulting portfolio of high conviction stocks, therefore, is concentrated with only 60 holdings and nearly a third of assets in the top ten stocks.

He is overweighting Spain and underweighting Switzerland, and by sector, favors consumer discretionary, while underweighting consumer staples and health care.

Manager Dean Tenerelli at T. Rowe Price European Stock (PRESX) is also bullish on Spain. Spanish exports have increased and "we are seeing growth in hiring."

Tenerelli also has an all-cap mandate, and utilizes a "growth at a reasonable price" strategy.

Recently, he increased the fund's exposure to the consumer discretionary sector, with an emphasis on media stocks that are benefiting from an improving operating environment.

He has increased the fund's exposure to financials, concentrating on high-quality southern-European banks.

WisdomTree Europe SmallCap Dividend (DFE) invests in the small capitalization portion of the European dividend paying market.

That means the smallest 25% in market cap, after subtracting the 300 largest companies. The remaining stocks are sorted by dividends paid.

The fund holds 237 stocks. By sector, industrials account for 25% of assets, followed by consumer discretionary, financials, and information technology.

About a quarter of assets are invested in the UK, followed by Sweden, and Italy. The fund is in the top 1% of Europe stock funds for the year-to-date, as well as trailing one, three, five, and ten year periods.

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