Dean Tenerelli: Running with the bulls in Spain — and in most of Europe

At least one fund manager is getting bullish on European stocks again. There still are many reasons to be selective, but there are signs that Europe is beginning to get its economic house in order — if you know where to look, said Dean Tenerelli, manager of T. Rowe Price Group Inc.'s European Stock Fund (PRESX). And he seems to be looking in a lot of profitable places — his fund's returns have ranked in the top third or better of funds in its category over one, three and five years. “Europe's been through a big crisis, as we know, and somewhere around the fourth quarter, stocks were beaten up again, so I started to buy more cyclical industries and some stocks in Spain,” he said. To understand that decision, one has to look at the significance of moves such as the European Central Bank's actions to provide a backstop for European debt. That helped persuade several shaky nations not to depart the eurozone, Mr. Tenerelli said.

"SIGNS OF LIFE"

“It ended up being a big turning point, and we are starting to see signs of life that are giving us a pretty good idea that the crisis is bottoming,” he said. Those signs might very well go unnoticed to the casual observer — something that Mr. Tenerelli, 48, a Philadelphia native who has lived in London for 12 years, certainly isn't. He moves passionately among topics involving European nations in the fluid way that some Philly natives reserve only for baseball and football. In an interview, Mr. Tenerelli first pointed to Ireland — where property values have begun to rise recently and where the gross domestic product also has seen growth this year. More important though, foreign companies are again setting up shop in Ireland — in numbers unseen since the Celtic Tiger days of pre-2008, he said.

SPAIN A SURPRISE

The biggest surprise, though, is his outlook for Spain. Despite the very high rate of unemployment that remains there, Mr. Tenerelli pointed to the fact that the nation has been fairly compliant with reforms urged on it by European Union leadership. He also noted that Spanish exports have increased since the crisis began there — even as harsh changes were implemented. “We are seeing growth in hiring, and the Spanish labor market has become competitive again,” Mr. Tenerelli said, referring to news that four automotive companies either are opening new plants or otherwise investing significantly in their operations in Spain — Ford Motor Co. and Renault SA among them. “Good companies do the right things in a crisis,” he said, first discussing regulated utilities before moving on to the Spanish financial and media sectors — each in turnaround mode — all without missing a beat. Mr. Tenerelli is fluent in Italian and Spanish — having completed a master's degree in Spain — and his hobbies include the piano (he learned to play in childhood) and a love of travel. This goes a long way in explaining Mr. Tenerelli's interest in Spanish television. He recounted the decimation the industry has suffered since 2008. At one time, much of the market consisted of regional television stations largely paid for by regional governments. But now, the industry has undergone massive consolidation, and the number of private channels has been winnowed down to two (Mediaset España Comunicacion SA and Antena3, owned by Atresmedia Televisión). “There has been an 80% drop in [television] advertising [since the crisis began]. It is incredible they survived, and their margins are likely to increase exponentially when advertising picks up,” Mr. Tenerelli said. When asked about living in the United Kingdom, he said that he appreciates how easy it is to travel from there, given his job and interests, and that “London seems to me like the center of the world, yet is still civil and safe and homey.”