How to pick the equity winners in Europe

Baillie Gifford's European equity specialist Tom Coutts said the Italian election was not a game-changer for markets, but has thrown up opportunities for stockpickers as uncertainty hit share prices.

He said European equities are now cheap following a sell-off as investors worried about the result of the election, in which no single party gained an outright majority of the votes. Historically, European equities have traded on a cyclically adjusted P/E ratio of 18, which has now come down to 11, the manager noted. Meanwhile, the average dividend yield for the top ten holdings in the Baillie Gifford European fund is 3.3%, while the coupon on a 10-year Roche corporate bond is 1.6%, for example.   “You are not being paid much to take on what could be a large amount of inflation ris...