Best European Stocks to Watch for 2024
The internet's widespread use has made it highly likely that UK investors will come across European stocks. This might spark curiosity and raise questions about the viability of investing in them. Since investment goals vary, we can't decide for you.
However, we've compiled a list of well-known European stocks to watch and provide a general overview of how to invest in European stocks for UK-based investors.
Table of Contents
What are European Stocks?
European stocks refer to stocks of companies based in Europe. It's essential to understand that a stock listed on a European exchange like Euronext doesn't automatically make the company European.
For instance, Apple has some shares listed on the Euronext exchange and other international exchanges, but it is an American company. In this article, we focus exclusively on European stocks, including German car manufacturers and French fashion giants, among others.
Best European Stocks to Watch
Here are just a few European stocks to watch for this year. Identifying the ‘best’ stocks for your portfolio is subjective as every investor has a different risk tolerance. However, the list can serve as a good starting point to do more research before making a decision. You can also use a demo trading account to practice your skills before going live.
- LVMH - France - Producer of Luxury Goods with Unparalleled Brand Recognition
- Air France-KLM - Fifth-biggest Airline Worldwide
- Volkswagen - Germany - Well-established Car Producer Looking to Become Dominant in the EV Space
- Allianz - German Insurance Provider Active in More Than 70 Countries
- ASML Holdings NV - Netherlands - Highly Technologically-Advanced Producer of Chip-printing Machines
- Heineken - Global Market Leader in Beer and Alcohol-free Beverages
- Nestlé - Switzerland - Largest Processor of Food and Drinks Worldwide
LVMH - Producer of Luxury Goods with Unparalleled Brand Recognition
LVMH (Moët Hennessy Louis Vuitton) is the parent company of the renowned Louis Vuitton brand. However, its portfolio extends far beyond that, encompassing numerous established brands such as Christian Dior, Loewe, Mercier, and Tiffany & Co.
In 2022, LVMH generated a staggering €79 billion in revenue, with approximately half of it originating from the fashion and leather goods industries. What makes this even more remarkable is the company's impressive growth trajectory. Since 2020, LVMH has nearly doubled its revenue and almost tripled its net profit becoming the first European company to reach a more than $500 billion valuation in 2023.
Nevertheless, there are concerns about LVMH's sales performance in the United States. While the company experienced a 14% growth in sales across Asia in the first quarter of 2023, its sales in the U.S. remained stagnant. Some attribute this to a potential slowdown in consumer spending in the U.S. overall, likely influenced by rising interest rates.
Air France-KLM - Fifth-Biggest Airline Worldwide
Air France-KLM is the result of a merger between airline Air France and Dutch airline KLM in 2003, although its headquarters are located near Paris at Charles de Gaulle Airport.
The company has faced significant challenges in recent years, with its stock price plummeting by almost 80% over the past five years. This decline can be largely attributed to the impact of the COVID-19 pandemic, which severely restricted air travel in the tourism sector. Air France-KLM is still in the process of recovering from the repercussions of the pandemic. However, there are positive signs indicating progress.
In 2022, Air France-KLM returned to profitability, reporting earnings per share of €0.33 and a net profit of approximately €770 million. Nonetheless, it is concerning that airline share prices remain low, especially considering ongoing threats such as total liabilities surpassing assets and high-interest payments that continue to loom in the background.
Volkswagen - Well-Established Car Producer Looking to Become Dominant in EVs
Volkswagen, a prominent German automobile manufacturer, focuses on producing vehicles for the mass market. This is evident in its substantial revenue, which reached nearly €280 billion in 2022. Although the company's revenue has experienced fluctuations in recent years, there is a clear upward trend over the long term, considering its revenue was €219 billion in 2011.
With a vision for the future, Volkswagen aims to become the global leader in electric vehicles by 2025. This strategic direction aligns with the increasing demand for electric cars and the declining production costs resulting from technological advancements and economies of scale.
To achieve its goals, Volkswagen has committed to investing €180 billion in its electric vehicle initiative over the next five years. While only time will tell if they will successfully dominate the market, Volkswagen is undoubtedly a company worth watching for investors seeking opportunities in the electric vehicle transition.
However, Volkswagen faces several challenges, including the aftermath of the emission scandal in 2015, the shifting preferences of the Millennial and Gen Z generations towards ride-sharing, and the need to strengthen its marketing strategy outside of Europe.
Allianz - German Insurance Provider Active in More Than 70 Countries
By the end of 2022, Allianz - an insurance and capital management provider - managed assets worth over €2 trillion. Its revenue has shown consistent growth, increasing from €122 billion in 2015 to slightly over €152 billion in 2022.
Allianz sets itself apart in the insurance market with its decentralized management structure, operating through subsidiaries in more than 70 countries. With over 100 million customers worldwide, the company's global presence helps to provide a more diversified source of revenue.
In Germany, Allianz's brand is valued at over €20 billion, highlighting the country's significance as its most important insurance market. In addition to managing €2 trillion in assets, Allianz itself owns over €1 trillion in assets, providing a substantial financial foundation. This allows the company to invest heavily in new markets and operations while serving as a buffer during financial downturns.
Insurance stocks, including Allianz, have performed well recently. However, the company faces challenges due to accusations of potential investment fraud involving Structured Alpha Funds investors. Monitoring how Allianz addresses this situation with investors and regulators will be important, as it could influence the company's share performance.
ASML Holdings NV - Highly Technologically-Advanced Producer of Chip-Printing Machines
Among the notable European stocks on this list, ASML stands out as particularly intriguing. While its revenue in 2022 reached an impressive €22 billion, there are larger companies featured as well.
What sets ASML apart is its exceptional position as the most technologically advanced company in the chip manufacturing machine industry. It serves as a crucial supplier to leading chip producers such as Intel, Samsung Electronics, and the Taiwan Semiconductor Manufacturing Company.
ASML does face challenges stemming from market-wide factors like high inflation and pandemic-related supply chain issues. However, these are temporary concerns. On the other hand, the company is grappling with the inability to meet increasing demand due to production capacity limitations.
Heineken - Global Market Leader in Beer and Alcohol-Free Beverages
Heineken, a renowned global beer producer, most likely requires little introduction. It is a popular choice among investors due to its profitability and the consistent upward trend in its earnings per share (EPS). Over the past three years, Heineken's EPS has grown by an impressive average of 23% annually.
To continue its profitability growth, Heineken has set its sights on expanding into the Asian market. With rising economic development in populous countries like China and India, consumers have more disposable income to spend on non-essential goods, including beer and spirits.
Furthermore, Heineken is placing significant emphasis on alcohol-free beer. This product category bypasses the sale-related restrictions of alcoholic beverages, allowing for broader distribution and sales opportunities, including for underage consumers. The company invests substantial capital in marketing its alcohol-free products accordingly.
While Heineken is making substantial investments, it also faces increasing costs. Particularly, the rise in energy costs has had a negative impact on the company. In 2022, profit margins declined from 15.1% in the previous year to 9.3%. Therefore, keeping abreast of macroeconomic factors will also be important if investing in Heineken.
Nestlé - The Largest Processor of Food and Drink Worldwide
Nestlé, a well-established player in the food and beverage industry, has maintained a prominent presence for over a century. Founded in 1866 by Henri Nestlé, this Swiss-based corporation offers a wide range of products across various categories, including powdered and liquid beverages, animal food, and breakfast cereals. With a global reach, Nestlé operates through local branches in over 190 countries and employs over 300,000 people worldwide.
Over the past five years, Nestlé's share price has surged by over 40%, and its earnings per share have seen an annual growth rate of 14%. Achieving double-digit growth for a company with a market capitalization of 304 billion Swiss francs is an impressive accomplishment.
Nestlé is also recognized as a "dividend aristocrat," meaning it has consistently increased its dividend payout for 25 consecutive years. This makes it an appealing choice for UK investors seeking dividends in their portfolios.
However, Nestlé faces challenges, including its highly complex organizational structure, which is expected given the company's size. Additionally, Nestlé invests heavily in advertising but primarily follows a traditional advertising model. With increasing competition from other brands, Nestlé will need to exert effort to maintain its dominant position in the food market.
How to Invest in European Stocks
With Admirals, you can invest in European stocks with the following commissions:
- UK, France and German stocks – 0.1% of trade value, 1 GBP or 1 EUR minimum commission
- US stocks - $0.02 per share, 1 USD minimum commission
You can learn more about investing commissions on the Admirals Contract Specification page.
You can search for global stocks from the Invest.MT5 web platform and invest in four steps:
- Open an account with Admirals.
- Click the Trade icon next to your live or demo investing account. This will open the web platform.
- At the bottom of the Market Watch window, type in your stock and then drag the symbol onto the chart to view its live price.
- Either use the one-click trading feature on the top left or right-click and open a trading ticket to input your trade levels.
Why Invest in European Stocks?
Why should UK investors consider investing in European stocks? Since Brexit, the UK and European markets have become more separate, granting the UK greater independence. While their economies remain closely intertwined due to geographical proximity, a crisis in one may not affect the other in the same way.
The key benefit for UK investors adding European stocks to their portfolio is active diversification. By investing in multiple distinct markets, the risk of a single event significantly impacting the entire portfolio decreases but does not eliminate it entirely.
Another advantage is the substantial size of the European market. For instance, LVMH, mentioned earlier, became the first European company to achieve a €500 billion market capitalization. UK investors may find appealing value propositions in certain European stocks that are not readily available in the UK.
However, investing in European stocks also presents potential downsides, such as currency risk. European stocks are valued in euros, not pounds. If the euro weakens against the pound, UK investors may experience a decrease in relative net worth, even if the stock itself retains its value.
Another factor is that no matter what stock you invest in - whether from the UK, Europe or the US - there is the potential for gains and losses. As with any form of investment, the investor needs to be prepared to be ‘wrong’ on the potential of a stock’s performance. Therefore, risk management and diversification are important.
It is worth noting that many brokers - such as Admirals - offer demo accounts, allowing investors to practice and learn about European stocks in a simulated environment without risking real money. These accounts can provide valuable experience and insights before engaging in actual investments.
FAQs on European Stocks
Can I buy European stocks in the UK?
It is legal for UK investors to buy and own European stocks, even after Brexit. Many UK-based stock brokers, such as Admirals, offer European stocks to UK investors. Moreover, many European brokers allow UK investors to open an account with them.
What is the largest EU stock?
The company with the largest market capitalisation in Europe is LVMH, with a current market capitalization of roughly 442 billion euros.
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