If you're thinking that a near-20% drop in the EURO STOXX 50 index over the past six months signals a buying opportunity then you might want to consider giving a loved one a shares-focused investment this Christmas. But remember, investing in shares is for life, not just for Christmas. Over long time periods, shares tend to outperform other assets, which is why traditional portfolio management wisdom dictates that investors with long time horizons should have the majority of their portfolio in shares and only scale back their allocation to these assets as their horizon nears. Below are some investment ideas for those who want to be positioned for a long-term rebound in European shares. This is by no means an exhaustive list--use Morningstar's tools to find investments that suit your (or your loved one's) portfolio needs. Be sure to make the most of our asset allocation tools to ensure you're adequately diversified and on track to meet your financial goals.
On the First Day of Christmas...One Individual Stock Option
BG Group (BG.) is currently rated 5-stars by Morningstar--one of just five LSE-listed stocks to hold that rating at present, meaning our research suggests the stock is currently undervalued by the market. Morningstar equity analyst Allan Good has a 1,900p fair value versus BG's closing price on December 20 of 1,310p, signalling substantial upside potential for long-term investors. Good writes in his research report that BG's early entry into liquefied natural gas made the firm a leading global integrated natural gas player, positioning it to capitalise on growing global demand for natural gas. The next decade will see BG expand its LNG activities by developing its extensive gas resource in Australia, Good says, while a preeminent position in offshore Brazil should lead to high-quality oil production growth. Premium subscribers can read more here.
On the Second Day of Christmas...Two Passive Investing Options
For passive investors, the db x-trackers MSCI Europe ETF is suitable for use as either a core portfolio building block or a tactical tool. Morningstar ETF analyst Gordon Rose writes in his research report that it can be used as a core portfolio building block for investors seeking exposure to equity markets across developed Europe. As for its potential uses as a tactical tool, Rose says more aggressive investors could use this ETF to overweight European equities, or it can be shorted to bet against the performance of the underlying equities to hedge an existing position. Premium subscribers can read more here.
The iShares STOXX Europe 50 ETF is another passive-investment option. Morningstar analysts write that this ETF is most useful as a core portfolio building block. The iShares STOXX Europe 50 ETF is a suitable vehicle for investors seeking broad European equity exposure, while the inclusion of Switzerland and the U.K. makes this ETF a somewhat more diversified option than a strict Eurozone equity benchmark like the EURO STOXX 50. Premium subscribers can read more here.
On the Third Day of Christmas...Three Active Investing Options
Comgest Growth Europe is the only open-end fund in the Morningstar Europe Large-Cap Growth Equity sector that has earned our analysts' top Gold rating. Morningstar fund analyst Thomas Lancereau writes in his research report that this fund keeps its promises over time. The fund has outperformed the category average over three and five years. It has also proved to be remarkably resilient in a bear-market phase and is much less volatile than its peers. "In our opinion, investors can use it as the core of their portfolio and sleep soundly," says Lancereau. Premium subscribers can read more here.
Franklin Mutual European is another stand-out in its category--the only open-end fund in the Morningstar Europe Large-Cap Value Equity category that is rated Gold by our analysts. Lancereau says that putting its best foot forward in difficult markets is the key to this fund's long-term appeal. Franklin Mutual European has showed itself to be one of the most resilient funds focused on developed Europe, though its conservatism comes at the price of more-subdued performance during market rallies. Premium subscribers can read more here.
The two above options both have large-cap leanings, but our third option might be of interest to investors who want exposure to smaller companies. Allianz RCM Europe Small Cap focuses on smaller companies and is the only fund in the Morningstar Europe Mid-Cap Equity category that has earned a Gold rating. Morningstar fund analyst Simon Noth notes that European small caps can play a supporting role in a diversified portfolio. Noth writes in his research report on the fund that its strategy gives investors access to an experienced manager and a process that has been proven over a long time period. Premium subscribers can read more here.
Search for other investment ideas using Morningstar's screening and ranking tools for funds, ETFs, equities and investment trusts. Read Morningstar's latest research reports here.
