At one point only a possibility, Emmanuel Macron’s victory in the French presidential election has brought cheer to the Eurozone as a whole. With the centrist politician at the helm, the departure of a major power from the economic bloc looks improbable at the moment and the euro project seems secure.
Instead, investors can now focus on the economic success of the currency bloc, which has been going from strength to strength recently. Data on growth and manufacturing released at the beginning of this month lends weight to such an argument. Investing in stocks from the Eurozone at this time could boost your profits substantially.
Macron’s Win Ends “Frexit” Fears
Ultimately, the second round of France’s presidential elections was a tame affair. Macron easily defeated his opponent, right wing Front National candidate Marine Le Pen, by cornering 66% of the votes.
This is a vastly different outcome from the first round of elections when Macron secured 23.75% of the vote, while Le Pen won 21.53%. This amounted to a mere 20 point lead for Macron, but even this development sent the benchmark CAC 40 to a 2-year high. (Read:
French Stocks at 2-Year High on Macron Lead: 4 Picks)
Even then, the enthusiasm among market watchers was both palpable and understandable. While Macron had made it clear that he wants to keep France in the EU, Le Pen was committed to hold a referendum in which the people would decide whether to leave or stay in EU, raising the specter of a ‘Frexit.’
But this departure did not have as much as an impact as anticipated. This is possibly because Britain may not have been as central to the EU project as was earlier believed. But a “Frexit” would certainly have had a major impact, especially because France is also a member of the Eurozone. In fact, France’s departure from the EU would have placed the Euro in grave peril.
Eurozone Economy Strengthens
With the French elections out of the way, investors can now focus on Eurozone’s economic success. Of course, such fundamental strength was not gained instantly but only through steady improvements. For instance, the region’s manufacturing PMI has now increased for 46 consecutive months, accelerating notably in recent times. In contrast, the U.S. ISM Manufacturing index suffered a decline in April, as did China’s Caixin Manufacturing PMI.
The economic bloc’s labor market is also in good health with unemployment falling to significant low levels. At first glance, the U.S. unemployment rate of 4.4% recorded in April may seem significantly better, given that it is at its lowest since May 2007. But even at 9.5%, unemployment levels look favorable for the Eurozone. This is the lowest level experienced since Apr 2009 and, more importantly, the region is characterized by higher structural unemployment.
The icing on the cake is possibly recently released Eurozone growth data. In the first quarter, the region experienced quarterly growth of 0.5%. Such an expansion amounts to a yearly growth rate of 1.8% for the 19-country economic bloc. This is significantly better than the first quarter growth pace of 0.7% recorded in the U.S.
Macron’s electoral victory has dispelled all doubts about France’s future relationship with the Eurozone. Investors can now focus on robust economic fundamentals, evidence of which has been received even recently. Additionally, the ECB is likely to continue with its benign monetary policy, in sharp contrast to the Fed’s hints at monetary tightening.
Adding stocks from the Eurozone to your portfolios looks like a smart option at this point. However, picking winning stocks may be difficult.
This is where our
VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
ArcelorMittal ( MT Quick Quote MT - Free Report) is the world’s leading steel and mining company and is based in Luxembourg
ArcelorMittal has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of 89.6% for the current year. Its earnings estimate for the current year has improved by 8.8% over the last 30 days. The stock has returned 13.9% over the last six months outperforming the Zacks
Steel - Producers Market sector, which has gained 1.4% over the same period. RWE Aktiengesellschaft ( RWEOY Quick Quote RWEOY - Free Report) is an Essen, Germany-based company active in the generation and transmission as well as the sale and trading of electricity and gas.
RWE AG has a VGM Score of A. The company has expected earnings growth of 42.5% for the current year. Its earnings estimate for the current year has improved by 22.2% over the last 30 days. The stock has returned 15.7% over the last six months, outperforming the Zacks
Utility - Electric Power Market sector, which has gained 7.5% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Unilever N.V. ( UN Quick Quote UN - Free Report) is one of the world's largest consumer products companies and is based in Rotterdam, Netherlands.
Unilever has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 7.2% for the current year. Its earnings estimate for the current year has improved by 3.2% over the last 60 days. The stock has returned 27.3% over the last six months, outperforming the Zacks
Soap and Cleaning Materials Market sector, which has gained 8.1% over the same period. Orange S.A. ( ORAN Quick Quote ORAN - Free Report) is a telecom services provider based in Paris, France.
Orange has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 2.1% over the last 30 days. The stock has returned 8% over the last six months, outperforming the Zacks
Wireless Non-US Market sector, which has gained 3.7% over the same period. Banco Bilbao Vizcaya Argentaria, S.A. ( BBVA Quick Quote BBVA - Free Report) is engaged in a wide variety of banking, financial and related activities in Spain.
Banco Bilbao has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 11.8% for the current year. Its earnings estimate for the current year has improved by 0.8% over the last 30 days. The stock has returned 28.9% over the last six months, outperforming the Zacks
Banks – Foreign Market sector, which has gained 15.5% over the same period. 5 Trades Could Profit "Big-League" from Trump Policies If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
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