Stocks Too Pricey? Wall Street Legends May Have Forgotten Europe

All the legendary Wall Street investors complaining about how expensive stocks have become can’t have been talking about Europe.

Valued near a record low relative to the S&P 500 on an estimated price-to-book basis, the Stoxx Europe 600 Index has lagged behind in the equity market’s recent rally, adding 18% since the March trough compared with a gain of about 30% in the U.S. benchmark.

“European equities have massively underperformed the U.S. year-to-date,” said Alberto Tocchio, chief investment officer at Swiss wealth-management firm Colombo Wealth SA. “We are getting increasingly less bearish on European value sectors -- autos, financials -- mainly due to due to light investor positioning and fundamental valuations.”

Tocchio’s comments provide a contrast with those of high-profile investors Stan Druckenmiller and David Tepper, who this month becamethe latest to weigh inafter a historic market rebound, saying the risk-reward of holding shares is the worst they’ve encountered in years. The surge in technology giants, such as Inc. and Alphabet Inc., has sent the estimated book value of the Nasdaq Index near record highs, while the European benchmark is trading at about a quarter of that valuation.

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