Germany: On Sale

09/03/2015 9:07 am EST

Focus: STOCKS

Tony Daltorio

Editor, Investors Alley Premium Digest

It's time to pounce on select German stocks. At a time when many of the world's economies look sick, the German economy stands out, asserts Tony Daltorio in Daily Profit.

Germany also has the best economic growth of any of the developed countries. Consumer confidence is at levels not seen since 2011. Debt and deficits are low. Inflation and interest rates are both near zero.

German companies have also done well. Many have become as successful globally as the country's soccer team has on the pitch. Overall, German companies have spent $170 billion on global acquisitions in 2014 alone.

Yet, the German DAX index peaked in April and it has been in a slippery downward slope ever since. The reason? Too much, too soon. The DAX soared nearly 50% from October 2014 to April 2015.

Baring Asset Management's Robert Smith thinks this dip in German stocks offers a buying opportunity. He wrote in a note to clients that German stocks offer a "superior earnings growth outlook" to their European peers.

And I would venture that the outlook for many German companies is better than many US corporations too.

That makes the iShares MSCI Germany ETF (EWG) an interesting play, as is Volkswagen Group (VLKAY).

For investors interested in other individual stocks, here is a short list I compiled:

  • TUI AG (TUIFY)—With German consumer confidence high, this company focused on travel and tours should benefit.
  • Adidas AG (ADDYY)—This competitor to Nike (NKE) continues to perform and has caught up to Nike in China.
  • Bayer AG (BAYRY)—The drug and chemicals powerhouse is transforming itself with a spin-off of its plastics business. Its drug pipeline is among the best for the big pharma companies.
  • Beiersdorf AG (BDRFY)—The personal-care products company (think Nivea) has a strong global footprint.

Weakness in any of these stocks—thanks to China, or Greece, or any other macroeconomic factors—should be welcomed.

A sale on high-quality German companies is a gift from the investing gods and a perfect way to sleep easy at night.

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