Europe's freakout is investors' gain, fund managers say

Bottom-up stock pickers are finding convincing value among the carnage of the European financial crisis. “As equity investors, we don't buy stocks based on macroeconomic headlines, because we're looking at the quality of corporate balance sheets,” said Nigel Emmett, client portfolio manager at J.P. Morgan Asset Management. Mr. Emmett, who helps manage $25 billion as the head of the global equity team for North American clients, said that with the exception of financial sector stocks, most European corporate balance sheets are in better shape now than they were in 2007. Among the latest macro headlines, as European Union policymakers scramble for a way to bail out some of the weaker countries, is a new warning by Moody's Investors Service that it is reviewing the credit ratings of European nations. “Undoubtedly, we're going to have a recession in Europe, but many of the individual companies still have world-class global footprints,” Mr. Emmett said. “I'm not ignoring the macro story, but when you're looking at the kinds of companies that have been beaten down by the macro story, it creates opportunities for active stock pickers.” In his go-anywhere global portfolio, David Marcus, chief executive and chief investment officer at Evermore Global Advisors, said that he currently favors the United States and Europe, despite the unfolding crisis. “We factor in that things will be weak, but a lot of these companies have been sold off to levels that don't make sense,” he said. “Things are cheap because investors are freaking out, and in a crisis, investors return home and invest locally, but a lot of the companies that have been sold off are giving you cheap exposure to places like the U.S., Asia and the emerging markets.” Mr. Marcus acknowledges that the political and sovereign debt issues facing several of the eurozone nations will be a major challenge for years to come, “but I think the companies are much smarter than the countries.”