Monday, April 28, 2025
12:50 PM
Doha,Qatar
RELATED STORIES

Herro sees opportunity to buy BMW amid Greece

The headquarters of BMW in Munich. While BMW shares slumped more than 20% from their peak in March on concerns about China, the company is actually doing quite well around the world, according to David Herro, one of the biggest US owners of shares in the region’s companies.

Bloomberg
Paris



European stocks offer some of the world’s best investment opportunities even after outperforming other markets this year, in part because Greece’s festering crisis scared away buyers, said David Herro, one of the biggest US owners of shares in the region’s companies.
Greece’s struggle to obtain a new bailout, and its potential exit from the euro, highlight the structural flaws in the European Union, said Herro, chief investment officer for international stocks at Harris Associates in Chicago. As a result, he’s loading up his $30bn Oakmark International Fund with shares of companies such as BMW and BNP Paribas at attractive prices.
“If you look at valuations around the world, you really still see the preponderance of value based in Europe,” Herro said in a telephone interview. “If you look at the last two to three years, clearly this Greek thing has been a great deal of the reason for this. People see the potential disintegration of the eurozone and they make a macro call and they want to just not be involved in the market.”
Concern over the Greek crisis has been a drag on European stocks after they posted the best first-quarter rally since 1998. The Stoxx Europe 600 Index flirted with a correction last week, falling almost 10% from an April record through Tuesday before paring some losses. That has pushed its valuation to 16.5 times the estimated earnings of its companies, compared with a high of 17.4 times in April.
The gauge climbed 1.6% in London.
Many of the Europe’s largest companies earn a big chunk of their profit in other parts of the world, so they’ll do fine even if the region’s economy struggles, he said. And he does expect it to struggle.
The euro region is a flawed project because countries like Greece and Germany are too dissimilar to be in it together, Herro said.
Also, government spending on social welfare in Europe is unsustainable, especially in countries that don’t have growing populations, he said. While countries such as Ireland, Spain and Italy have taken or are taking steps to fix these “structural deficiencies,” others, notably France, haven’t, he said.
“There will be a lack of investment, a lack of robustness, a lack of productivity growth, a lack of economic growth in Europe until they address these structural rigidities,” he said. “That’s not a reason to be invested or not invested in Europe, because they have some really good, strong global businesses with good management teams selling at attractive valuations for the medium- and long-term investor.”
European consumer-product companies also are suffering from the slowdown in China and other emerging markets, so their share prices have been depressed, said Herro, who owns shares in Diageo, the maker of Guinness stout and Johnnie Walker whisky, and Cie. Financiere Richemont, the Swiss manufacturer of Cartier jewellery and Montblanc pens.
That’s allowed him to accumulate shares in anticipation of a rebound in those economies, he said.
While BMW shares slumped more than 20% from their peak in March on concerns about China, the company “is actually doing quite well around the world,” Herro said. “Their recent sales numbers were quite strong even though China slowed down.”
The stock is attractive at 9.4 times next year’s earnings, he said. BNP, which Herro also owns, trades at 9.8 times projected profit, compared with 16.5 times a year ago, data compiled by Bloomberg show.
Herro owns shares of one Greek company, Titan Cement Co, in his $3.5bn Oakmark International Small Cap Fund. Only 20% of its operating profit comes from Greece, with the rest from Egypt, the US and the Balkans. “It’s like a four- legged chair, and only one of the legs is dependent on Greece,” he said. Standard & Poor’s last month raised its outlook on the company’s debt to positive from stable.
While markets rose Friday on optimism that a deal will be struck to keep Greece in the euro region, any declines in coming days will be a buying opportunity, said Herro, whose flagship fund has returned 17.8% annually the past three years, beating 95% of similar funds.
“The market prices are extremely volatile; the underlying valuations are relatively stable,” he said. “With or without a Greek deal, BNP Paribas, or BMW, or Daimler, or Allianz, they’re not worth any less. If for some reason the share prices drop dramatically, we would be looking to add to our positions.”


Comments
  • There are no comments.

Add Comments

B1Details

Latest News

SPORT

Canada's youngsters set stage for new era

Saying goodbye is never easy, especially when you are saying farewell to those that have left a positive impression. That was the case earlier this month when Canada hosted Mexico in a friendly at BC Place stadium in Vancouver.

1:43 PM February 26 2017
TECHNOLOGY

A payment plan for universal education

Some 60mn primary-school-age children have no access to formal education

11:46 AM December 14 2016
CULTURE

10-man Lekhwiya leave it late to draw Rayyan 2-2

Lekhwiya’s El Arabi scores the equaliser after Tresor is sent off; Tabata, al-Harazi score for QSL champions

7:10 AM November 26 2016
ARABIA

Yemeni minister hopes 48-hour truce will be maintained

The Yemeni Minister of Tourism, Dr Mohamed Abdul Majid Qubati, yesterday expressed hope that the 48-hour ceasefire in Yemen declared by the Command of Coalition Forces on Saturday will be maintained in order to lift the siege imposed on Taz City and ease the entry of humanitarian aid to the besieged

10:30 AM November 27 2016
ARABIA

QM initiative aims to educate society on arts and heritage

Some 200 teachers from schools across the country attended Qatar Museum’s (QM) first ever Teachers Council at the Museum of Islamic Art (MIA) yesterday.

10:55 PM November 27 2016
ARABIA

Qatar, Indonesia to boost judicial ties

The Supreme Judiciary Council (SJC) of Qatar and the Indonesian Supreme Court (SCI) have signed a Memorandum of Understanding (MoU) on judicial co-operation, it was announced yesterday.

10:30 AM November 28 2016
ECONOMY

Sri Lanka eyes Qatar LNG to fuel power plants in ‘clean energy shift’

Sri Lanka is keen on importing liquefied natural gas (LNG) from Qatar as part of government policy to shift to clean energy, Minister of City Planning and Water Supply Rauff Hakeem has said.

10:25 AM November 12 2016
B2Details
C7Details