Going Global with Standard & Poor's

02/25/2005 12:00 am EST


Ken Shea

Managing Director, Standard & Poor's Global Equity Research

Ken Shea, managing director of S&P's Global Equities Research Group, is responsible for the activities of some 80 equity analysts, covering over 1700 stocks. Here, he covers some of his favorite stocks from Europe, China, and Japan.

"We like several European stocks right now, including  AstraZeneca (AZN NYSE), a major leading pharmaceutical company, based in the UK. It makes products such as Prilosec, and other drugs for hypertension, heart failure, and schizophrenia. We also like Tesco (TESOF NASDAQ), which is basically the Wal-Mart of Europe. It is a rapidly growing grocery retailer. Burberry (BBRYF Other OTC) is a fashion retailer that’s capturing a large portion of the brand value chain in the US, Japan, Spain, etc. We think revenues and profits are likely to benefit.

"We also like Endesa (ELE NYSE). This is the largest electric company in Spain, but also growing outside that region in Western Europe. It operates hydroelectric, nuclear, coal, oil, and gas generating facilities. It’s one of the largest suppliers of electricity and gas to deregulated customers. We like it because of its sound fundamentals and established business model. Although unspectacular, its growth is likely to be in the high single digits, and the stock offers a 3.5% dividend and trades at a discount to its peers. We're believers in dividend paying stocks, particularly those with established records of growing earnings, such as Endesa.

"MMO2 (OOM NYSE) is a fast growing provider of mobile communications services in Europe. The company is getting a lot of attention because of the growth in its Internet services offerings through Europe. Finally, we also like the Royal Bank of Scotland (RBS-M NYSE). This is a company that has been growing aggressively through acquisitions, including the purchase of Natwest, the well-known full-service bank in Europe. It’s also expanding its consumer franchise aggressively, both in Europe and the US. The company has been putting up strong profit growth numbers recently.

"In Asia, we like China Mobile (CHL NYSE), which is the leading global services provider in Mainland China. It’s just truly a great play on the rising standards of living in China. It provides a full range of mobile telecom services in 21 service regions in China. Total population residing in this service area exceeds one billion. Their subscriber base is growing at a near 20% annual clip and its market share in its service territory is about 65%. So we see huge upside growth potential in these shares.

"I’d also like to touch on Japan, as we’ve had a lot of questions about Japan at this conference. The country still has some key structural issues to deal with, including the repair of its still-fragile banking systems . On the other hand, the long-term attractiveness rests on the country’s continued ability to innovate. They have a highly educated workforce. Those who are bearish on Japan continue to underestimate its ability to innovate and stay one step ahead of its neighbors. Despite our general concerns, there are several individual stocks in Japan that we like now.

"Yankgzo Coal (YZC NYSE) is benefiting from the explosive demand in energy in China. There has already been a well-documented shortage of coal, and this company is the leading underground miner and producer of coal and related materials for China. The stock has benefited as a result, but we think there is still more upside. Canon (CAJ NYSE ) is the well-known Japanese-based maker of copy machines, laser and ink jet printers, camera, and other electronic components. This company executes very well. It’s well managed.Hitachi (HIT NYSE) can be thought of as the ‘GE’ of Japan. It’s a producer of a wide mix of products, ranging from industrial and electricity generation systems to consumer products and consumer devices. We believe that this company is likely to benefit from the global economy’s thirst for information in telecommunications, digital media, consumer products, and information technology related equipment.Cosco Pacific (CSPKF Other OTC) is a smaller company. It is a Hong Kong-based shipping company that is aggressively investing in container ports in China and throughout Southeast Asia. The company is establishing itself as a leader on that front. We like this stock very much."

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