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BUSINESS A25
Monday 19 October 2015
Of Mutual Interest
Europe’s allure: Investors pour billions into the continent
STAN CHOE — Defeating the “home stock funds over the same traded at 14 times its ex- lus mode, while the Fed-
AP Business Writer bias” time. pected earnings. While eral Reserve has already
NEW YORK (AP) — Europe Invest in what you know. — Valuations are cheaper that’s not screamingly halted its bond-buying
has been a land of disap- It’s a phenomenon around The surge for U.S. stocks cheap, it’s less pricey than program and is discussing
pointment for years for in- when to raise interest rates.
vestors. And they can’t get Customers at a tavern clink glasses filled with tsipouro in Tirnavos, central Greece. Europe has — Profits are playing
enough of it. catch-up
Investors are so hot for been a land of disappointment for years for investors. And they can’t get enough of it. Investors Profitability for European
the continent that made companies is well behind
“debt crisis” and “auster- are so hot for the continent that made “debt crisis” and “austerity” everyday terms that they’ve U.S. companies. If they can
ity” everyday terms that close that gap, European
they’ve plowed more than plowed more than $30 billion this year into mutual funds and exchange-traded funds that focus stocks have room to rise,
$30 billion this year into mu- says Dan Ison, portfolio
tual funds and exchange- on European stocks. (AP Photo/Thanassis Stavrakis) manager at the Columbia
traded funds that focus on European Equity fund.
European stocks, a rela- the world, and people since 2009 means they’re the United States. Corporate profits usually
tively niche category that tend to invest heavily in more expensive relative — The economy is improv- set records during each
has $81 billion in total as- stocks from their home to how much profit they’re ing economic cycle, and
sets. The move is part of a country. producing. The S&P 500 set After shrinking in 2012 and that’s been the case in the
broader migration into for- That’s why foreign stocks its record high this summer 2013, the euro area’s econ- United States during this
eign stock funds and away make up small portions of and trades at about 16 omy returned to growth expansion. But European
from many U.S. stock funds, many U.S. investors’ port- times its expected earn- last year. This year, growth corporate profits are still
which have been some of folios, even though they ings per share. is set to accelerate to 1.5 below where they were
the best performers since make up close to half European stocks, mean- percent, and the Interna- before the 2008 financial
the financial crisis. the global market. That’s while, have been on a tional Monetary Fund ex- crisis. Now that Europe’s
Several motivations are be- changing. bumpier ride. The MSCI pects it to improve again economy is slowly improv-
hind the shift, including the Investors pulled a net $7 Europe index is still about next year to 1.6 percent. ing, Ison expects earnings
desire to make portfolios billion from U.S. stock funds 30 percent below its peak That’s lower than the ex- growth to accelerate.
less U.S.-reliant and more from the beginning of this from before the Great Re- pected U.S. growth rate of That has him looking for
like the global stock mar- year through August, ac- cession, in dollar terms. 2.8 percent in 2016, but Eu- companies that do lots
ket. The fits and starts for cording to Morningstar. The relatively listless perfor- rope’s economy is earlier in of business within Europe
European stocks in recent They pumped nearly $210 mance means the MSCI its recovery. The European to benefit from the growth.
years have also opened billion into international Europe index has recently Central Bank is still in stimu- His fund owns construction
up another attraction, par- and media companies, for
ticularly when compared example. One of its big-
against a U.S. market that gest holdings is Ryanair, a
has gone nearly straight up discount airline that serves
for years until recently: Vive leisure travelers around Eu-
la valuation. rope.
“I think it’s a fairly logical — Currency and other risks
shift: People are seeing One danger of dropping
more value outside the the “home bias” is that
U.S. than inside the U.S.,” investors may introduce
says Rob Lovelace. He is a new form of risk to their
a senior member of the portfolios. When the euro
management committee or Swiss franc fall in val-
of Capital Group, whose ue, it can erode or even
American Funds fam- wipe out returns for inves-
ily is home to some of the tors counting their perfor-
largest international stock mance in dollars.q
funds.
The flows into Europe have Delta Air Lines Inc. tops 3Q profit forecasts
been erratic. When wor-
ries have flared about Eu- DAVID KOENIG mer-vacation season performance to industrial Passengers got a small
rope’s debt troubles, Rus- AP Airlines Writer companies such as 3M — break from the cheaper
sia’s involvement in the Cheaper fuel helped Del- when airlines are most by notable omission, not fuel, as the average fare
Ukraine or how European ta Air Lines Inc. shrug off a against other airlines. per mile dropped 5 per-
exporters will cope with slight decline in revenue profitable. Delta predict- Airlines are among the cent.
a weak global economy, and post sharply higher biggest beneficiaries of Delta, however, banked
dollars have headed out third-quarter net income ed that it would continue the slump in oil prices that two-thirds of the fuel sav-
of the region. Those risks of $1.32 billion. began in mid-2014. Delta ings as profit. It didn’t have
remain, as does the pos- The profit announced last to rack up healthy mar- burned more than 1 billion to cut fares more deeply
sibility that a weaker euro week was slightly bet- gallons in the third quarter because demand for trav-
could dilute returns for U.S. ter than Wall Street ex- gins into the winter on the and saved more than $1 el remained solid — many
investors. pected. Delta’s shares per gallon over last year’s planes were packed. The
Here’s a look at what’s at- rose more than 2 percent combination of cheaper price. average flight in the quar-
tracting investors to Euro- in afternoon trading on Delta’s fuel spending ter was 86.8 percent full,
pean stock funds, as well Wednesday. fuel and solid demand for plunged 38 percent, a a level that would have
as considerations that The third quarter includes savings of more than $1.1 been unimaginable a few
need to be made before much of the busy sum- travel. billion. years ago.q
joining the crowd.
“We expect that strong
performance to continue
in the December quar-
ter,” said CEO Richard An-
derson.
On a conference call with
analysts, Anderson com-
pared Delta’s financial
