Buy into Europe's best to enrich your savings

Continental Europe in both brand and investor terms means Carlsberg and Fiat, Ikea and Kit Kat, Nokia and Renault. These are household names on a global basis but their headquarters lie outside the UK.

Problems with the euro should not deflect those holding sterling from seizing the opportunity to buy into some of the world's major brands and efficient companies. For a balanced portfolio, continental Europe has to have a substantial place.

Whilst some states were allowed to join the euro without meeting the budget deficit requirements – notably Greece – their attempts to control public spending will mean both slower growth and a period of volatility. This means investors need an experienced and talented stock picker.

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Many valuations in Europe now look attractive. Continental equities are trading on 12 times prospective earnings – well below the historic 15 times average.

Advisers who urged extreme caution ahead of the stress testing of European banks have missed some good purchases. In fact, only seven out of 91 banks failed, most of which were Spanish.

They will take comfort from remarks made earlier this month by the head of the European Central Bank, Jean-Claude Trichet, who warned that growth in the second half of the year was likely to be slow. This followed eurozone data from the second quarter and last month which was firmer than the ECB predicted.

Factory-gate inflation is three per cent (by comparison with five per cent in the UK) and the interest rate one per cent (but 0.50 per cent here, 0.25 per cent in US and just 0.10 per cent in Japan).

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Some countries are showing their strength and benefiting from the euro's weakness, notably Germany. It received a surge in industrial orders in July, which suggests Europe's industrial heartland can capitalise on strong world expansion.

Industrial production in the last 20 years is up 23 per cent in Germany but by only three per cent in the UK.

In other fields, like alternative energy, there is a good synergy between private enterprise and governments.

Europe should not be thought of solely as the 16 nations forming the single currency euro. Throughout there are good quality, high growth companies. Outside the euro, consider such key countries as:

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Denmark with firms like Novo Nordisk (world leader in diabetes care) and Novozymes (creating bio-industrial products for home cleaning);

Norway with companies like Statoil (gas and oil production for 35 years);

Sweden with firms like Modern Times (entertainment broadcasters);

Switzerland with companies like Acetelion (bio pharmaceuticals), Nestle (confectionery), Novatis (drugs manufacture), SGS (inspection, verification, testing and certification) and Syngenta (crop disease protection).

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Whilst shares in these companies can be purchased through a UK stockbroker, to overcome high dealing costs and spread risk, opt instead for a fund.

As a barometer to investor sentiment among the top companies, the FTSE Eurofirst 300 index is close to its high over the last two years when it has oscillated between 657-1212. After the slump that followed the Lehman crisis, this shows a new confidence that the problems encountered either can or have been overcome.

European states have not been shy to address such problems as rising health costs and pension obligations, even if it means heavy taxation.

For a passive fund which tries to mirror an index, consider Legal & General's European Index. In the last five years, it has only deviated 0.15 per cent from the FTSE Europe ex-UK Index. France, Germany, Switzerland and Spain take the top four places and the three major sectors are consumer goods manufacturing (16.7 per cent), industrial materials (16.2 per cent) and healthcare (10.3 per cent). Martin Payne, director at Leeds-based stockbrokers Brewin Dolphin tips Neptune European Opportunities, which has attracted 980m to a relatively concentrated portfolio. It is up 61 per cent over five years. Ignis Argonaut European is also favoured by Mr Payne. The fund looks for companies which can deliver faster earnings/dividend growth than the market and are trading at unwarranted discounts. It is up 55 per cent in five years.

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Saga expects sovereign debt to force a sustained period of fiscal austerity in the eurozone. It recommends going for "well capitalised companies with an earnings exposure to markets outside the eurozone."

It particularly tips Schroder European Alpha Plus and Jupiter European Special Situations with the caveat that a balanced approach to asset allocation is taken.

With an investment trust, the manager has the ability to borrow to secure a temporary advantage, known as 'gearing'. Over five years on a net basis after 3.5 per cent average charges have been taken into account, the leaders according to the AIC using Morningstar research are:

Jupiter European Opportunities, up 52.4 per cent;

Gartmore European, up 49.9 per cent;

Henderson EuroTrust, up 41.3 per cent;

Charter European managed by Allianz Global Investors, up 34.7 per cent.

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Among active unit trust/OEIC managers, Cedric de Fonclare at Jupiter is well regarded. He is currently strong on technology, industrial and healthcare and warns against southern Europe as "too risky with political interference". One of his tips is Zodiac, a French safety equipment manufacturer for aircraft.

Surprisingly few managers hold any or a sufficient balance of Portuguese stocks despite their real potential. Jeronimo Martins with over 2,000 stores, EDP for electricity, Galp Energia and Portugal Telecom are just a few of the leaders on the Euronext Lisbon stock exchange.

It is also the most dynamic European state for supermarket banking – showing the rest of Europe the way it will go.

Among collectives to consider, BlackRock European Dynamic has outperformed its sector and is tipped by The Share Centre. It is up over 61 per cent in five years.

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For a fund that is defensively managed, look at Cazenove European, which holds such strong stocks as Allianz, France Telecom and Heineken. It has been run for the last eight years by Chris Rice.

Taking a 10-year view, Lipper research for the Yorkshire Post revealed the top funds as CF Odey Continental European (up 131.6 per cent), Fidelity European (up 87.2 per cent), Jupiter European Special Situations (up 76.2 per cent) and Jupiter European Special Situations (up 71.4 per cent).

Yet it also disclosed funds which have underperformed: Aegon European Equity (down 27.4 per cent), CF Canlife European (a 19.9 per cent fall) and Baring European Grown (down 14.9 per cent).

By subscribing monthly, the investment avoids picking just the wrong moment in an investment cycle. Also, place as much as possible in an ISA for tax efficiency.


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Gavin Anderson, pictured, a Sheffield-based 31-year-old who works for a national charity that helps those with learning difficulties, has chosen continental Europe for one of his lump sum investments as "it has more potential for growth than the UK or US".

He also wanted to spread his portfolio which includes China, ecology, emerging markets, India and a UK growth fund. Gavin chose the Jupiter European Special Situations Fund managed by Cedric de Fonclare 18 months ago "as the figures pointed to the manager's success".

He transferred money from a savings account and invested directly with Jupiter.

Away from finance, Gavin plays in a band and enjoys football and skiing.