These Italian Stocks Look Attractive
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Investing across the globe is a journey fraught with potential hazards. Geopolitical concerns seem to rear their ugly heads on a weekly basis, serving to create a heightened level of risk. This is particularly true in Europe, where the ongoing fiscal crisis continues to be a huge drag on economic growth.
At the same time, there remain plenty of highly profitable stocks that call Europe home. Even in Italy, where the effects of austerity and punishingly high unemployment threaten to plunge the nation into recession, there are stocks that are worthy of investment.
That’s because these stocks have the ability to maintain impressive profitability even in the face of such economic distress, due to the global reach of their impressive brands. Just imagine what these companies could do once Italy returns to a normal economic climate.
Even in a down economy, profits keep gushing higher
Italian oil major Eni (NYSE: E) continues to pump out profits and dividends, even in such a dire economic environment. Even better, the company’s dividend yield consistently trumps that of its main rivals. Whereas most U.S.-based integrated energy companies offer dividend yields between 3% and 4%, Eni’s yield clocks in at a significantly higher 5%.
Fortunately for shareholders, Eni can maintain such an impressive dividend due to the strength of its underlying business. Eni reported that its fourth-quarter adjusted operating profit rose more than 17% year over year. Full-year results were also solid, as net sales increased more than 18% and adjusted profit rose almost 15% versus the prior year.
This resilience stands as a testament to Eni’s business quality, and since oil prices are rising and global energy demand is a seemingly untamable beast, there appears to be no reason for why Eni cannot keep paying huge dividends for many years to come.
Luxury brands for the affluent consumer
It might seem surprising that some of the best luxury brands come from Italian companies, particularly in a time of such severe economic downturn, but it’s true nonetheless.
First, Italy is home to luxury eye wear maker Luxottica Group (NYSE: LUX). While you may not think that eye wear is big business, Luxottica’s $25 billion market value and nearly $10 billion in trailing twelve-month revenue should prove otherwise.
Luxottica recently reported strong first-quarter growth, with sales and net income increasing 4.2% and 24%, respectively, year over year.
Pronounced strength was seen from the emerging markets, where rising middle classes mean millions of new customers. Luxottica racked up 17% sales growth in the emerging markets on a constant currency basis, led by 30% sales growth in Brazil. Clearly, emerging market growth represents a huge opportunity for investors.
Not to be outdone, Italian automaker Fiat (NASDAQOTH: FIATY.PK) holds a slew of luxury brands itself. The company’s brands include Fiat, Alfa Romeo, Ferrari, and Maserati. Fiat has a long and proud history, selling its cars in more than 40 countries and tracing its roots all the way back to 1899.
Unfortunately, it appears Fiat’s control of Chrysler led to a disappointing first-quarter. Due to significant costs pertaining to the new Jeep model rollouts, Fiat’s total first-quarter profit fell 23% year over year.
That being said, Fiat expects full-year profit growth and stuck to that forecast in its first-quarter report. Management maintains its view for full-year profits to be between 4 billion and 4.5 billion euros, up significantly from 3.81 billion euros the year prior.
The bottom line
When scouring the investment landscape, you’ve likely overlooked Italian stocks, and nobody could blame you: the ongoing fiscal calamity presents a huge potential headwind for investors. That being said, it’s worth noting that even in such a dour situation, Italy still represents the eighth-biggest economy in the world by gross domestic product, according to the United Nations.
Moreover, these stocks have demonstrated a keen ability to remain profitable and reward their shareholders with strong dividends or growth, throughout the economic distress facing Italy. Although the Eurozone remains in a troublesome position, these stocks have the potential for outperformance should any signs of recovery emerge from the region. And, they're already flexing their muscles in the emerging markets, which should only continue going forward. As a result, investors would be wise to consider these Italian stocks.
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Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!