I was thinking about buying some Euro denominated shares, for example in Germany. The reason is that when we look on EURUSD in longer perspective we can see that Euro is cheap versus USD.
Obviously no one knows what will happen with currency in long term, but as diversification is good when investing in companies it should be also good as it comes to currencies. When we think from macro perspective – US is doing great (if you don’t think so then read Buffett’s letter) and EU is struggling with some Greece problems etc. On the other hand I see that German economy is doing well and some German-exposed companies might be a good idea.
Some time ago I was analyzing ProSiebenSat.1 (read more). That time shares were traded at around 32-33 Euro vs now 38 Euro. Well, that was a good call, but maybe it is still interesting opportunity?
We are 4 months later, so company should be fundamentally worth a little bit more. OK, it went up more, but still, nice dividend is coming with yield > 5%. Valuation is OK with 10 times EV/EBITDA it is less than many high quality US companies. P/E ratio is 16 times, not low, but acceptable, especially if we note that almost whole profit is distributed via dividends.
Another company which is quite interesting is United Internet. This is pure play on development of IT infrastructure in Germany + software in cloud. Well, both trends should be favorable for long term investors. Company is also traded 10 times EV/EBITDA and 16.4 times earnings. Results are steadily growing:
Yield is a little bit lower, but growth in dividends is OK.
In fact when we compare long term performance of these companies we can see a very similar pattern:
Well, OK, United was performing better, but I am wondering whether dividends are included in this chart. I mean it doesn’t justify whole difference, but if we take 3-4% difference in dividend yield and 5 years then gap should be 15-20% lower.
Well truth to tell both of these companies are buy for me and I am seriously considering buying some shares. As it comes to business sensitiveness I think that ProSiebenSat.1 is more risky case. This is because ad market is cyclical and they are making money mainly on advertisements. If only market goes down a little bit and shares will be slightly cheaper…
Disclosure: PSM, UTDI – no position (yet)