Markets

3 European Mutual Funds to Buy as Economy Revives

Europe's economy has gained traction, thanks to upbeat jobs creation and business sentiment in January. Economic sentiment in the region is at its six-year best level, and the Eurozone economy expanded for the 14th straight quarter.

Banking on such positive trends, the addition of mutual funds having significant exposure to European securities could prove to be lucrative. Now let us take a look at some of the encouraging data that raised hopes of economic growth in Europe.

Strong Jobs Data

Job additions in the Eurozone reached the highest level in nine years last month, while unemployment hit single digits, per Eurostat. The three major nations which contributed to strong job creations are France, Italy and Germany, with job growth in these three countries reaching a 19-month, 6-month and 3-month high, respectively.

Additionally, stronger business confidence boosted job additions in the Eurozone. The Markit Eurozone PMI Composite Output Index remained unchanged at 54.4 in January. The output index continued to expand for the 43 rd consecutive month.

Moreover, Markit's Eurozone Services Business Activity Index came in at 53.7 last month, registering expansion for 42 nd straight month. Growth of service sector business and manufacturing production activity in some of the major Eurozone countries led to this expansion.

Eurozone Economy Continues To Expand

The Eurozone economy increased in the fourth quarter of 2016. According to Eurostat, GDP in the region rose 0.4%, in line with an increase of 0.4% reported a quarter earlier. Further, full-year 2016 GDP advanced 1.7% in the Eurozone, better than a rise of 1.6% in the U.S. The full-year GDP for the broader European Union (EU) also increased 1.9%.

Additionally, the European Commission raised its growth forecast for the broader European Union (EU). The European Commission now expects the EU to grow by 1.8% in 2017, surpassing its previous estimate of 1.6%. This came as a breather to investors as markets were weighed down by concerns over the nature of Trump's likely economic policies and Britain's decision to leave the EU.

Buy These 3 European Mutual Funds

All the economic reports clearly indicate that Europe's economy is stabilizing. Moreover, the Stoxx Europe 600 Index gained 9.5% and 1.1% over the last three months and one month, respectively.

Additionally, mutual funds related to the European equity market also registered strong returns. According to Morningstar, the region's equity mutual funds posted three-month, year-to-date (YTD) and one-year returns of 7.4%, 3% and 14.5%, respectively. This is far superior to the performance of the other international equity funds.

This upbeat backdrop calls for investing in three European mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive three-month and year-to-date (YTD) returns. They also have minimum initial investment within $5000 and low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Franklin Mutual European ATEMIX seeks growth of capital and income. TEMIX invests the majority of its assets in equity securities of European companies that are expected to be undervalued. The fund normally invests in more than five different countries, but sometimes may place all its assets in one single nation. It may also invest around one-fifth of its assets in companies located in the Middle-East and the U.S.

The fund has three-month and YTD returns of 9.5% and 2.4%, respectively, and an expense ratio of 1.33% as compared to the category average of 1.42%. TEMIX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Koninklijke Philips, Enel SPA and Novartis AG ADR were the top holdings for TEMIX.

Invesco European Small Company YESMYX seeks appreciation of capital for the long run. ESMYX invests the lion's share of its assets in equity securities of small-cap European companies. Small-cap companies are those whose market-cap is similar to companies included in the Russell 2000 Index.

The fund has three-month and YTD returns of 9.1% and 4.8%, respectively, and an expense ratio of 1.19% as compared to the category average of 1.42%. ESMYXhas a Zacks Mutual Fund Rank #2. Further, as of the last filing, Linedata Services, Caisse Regionale De Cred and Kardex AG were the top holdings for ESMYX.

JPMorgan Intrepid European AVEUAX seeks capital appreciation for the long run. VEUAX invests a bulk portion of its assets in equity securities of companies which are primarily based in Western Europe. The fund may try to manage its cash flows effectively by utilizing exchange-traded futures.

The fund has three-month and YTD returns of 9.1% and 5.4%, respectively, and an expense ratio in line with the category average of 1.42%. VEUAXhas a Zacks Mutual Fund Rank #2. Further, as of the last filing, Nestle SA, Roche Holding AG and British American Tob SP A were the top holdings for VEUAX.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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