Franklin fund manager: Pass on U.S., shop in Europe

Despite all the bad news surrounding European markets, a lot of good investment opportunities exist on the continent, according to Philippe Brugere-Trelat, executive vice president and portfolio manager at Franklin Mutual Advisers LLC.
During the past several months, concerns about Europe have grown as a sovereign-debt crisis has pushed Greece, Ireland and Portugal to seek bailouts from the European Union and the International Monetary Fund.
This week, Standard & Poor’s downgraded Greece’s credit rating for the fourth time since April 2010.
But all this turmoil provides many opportunities for investors looking for it, Mr. Brugere-Trelat said at a Franklin Templeton Investments press luncheon held today in New York.
“There are a number of reasons we firmly believe that a good crisis can create very good opportunities,” said Mr. Brugere-Trelat, who is the co-manager of the Mutual Global Discovery Fund, the Mutual European Fund and the Mutual European Fund.
If you compare Europe with the United States, there are several indications of the value lying in European stocks, Mr. Brugere-Trelat said. The price-earnings ratios of the European S&P 500 averages 11.4%, compared with 14% for the United States.
Similarly, price to cash flow for the European S&P 500 is nine times average earnings, compared with 8.48% for the United States, Mr. Brugere-Trelat said.
Corporate dividend yields in Europe are averaging 3.7%, compared with 2.4% in the United States. And that is significant, particularly given that the yield on the German 10-year government bond is at 3.3%, Mr. Brugere-Trelat said.
Specifically, he sees a lot of opportunities in the telecommunications and utilities sectors.
As for the United States, Mr. Brugere-Trelat said that his team isn’t seeing a lot of good value opportunities.
“We have been able to find good merchandise elsewhere,” he said.