While the uncertainty of the eurozone crisis is dragging down the price of equities, analysts say the real value in many companies is being overlooked.
"I think there is a tendency for people who are running their own pension to be more short-term," said Tom Tuite Dalton, fund analyst at Oriel Securities.
"I would think this is a buying opportunity. I speak to portfolio managers who run money for private clients and who want to buy European equities but their clients will not allow it."
"Arguably equities have already been sold off so any expectation is brought into the price," he added.
Speaking to FE Trustnet earlier in May, FE Alpha Manager Richard Hodges said he was surprised by how many young people were buying bonds when equities offer the potential for stronger long-term returns.
Meanwhile, in a separate FE Trustnet interview, Baillie Gifford’s James Anderson said he believed the obsession with short-term macro headwinds was masking the true potential of equity markets.
"European equities are cheap right now. I’m sure if you buy them you’ll make money in 10 years, but that doesn’t mean they’re going to go up right away. The trick is to buy at the right time, of course," commented Julian Chillingworth, chief investment officer at Rathbones.
Kieran Drake, research analyst at Winterflood Securities, added: "It’s a key theme when I speak to fund managers that they do see European equities as very cheap at the moment but they are aware of the macro concerns which are driving companies rather than the fundamentals."
"You may make money in 10 years but the question is whether you will in one year’s time."
Tuite Dalton believes many of the Europe-listed stocks being dragged down by the crisis have a global consumer base and great potential.
He said: "Look at, for example, the Jupiter European Opportunities Trust, which is managed by Alexander Darwall. He would tell you where a company is listed very often has little to do with where it earns money."
"He holds Amadeus, which makes software for airlines and is generating money from elsewhere. A company like Amadeus could move headquarters to Switzerland or anywhere else if things take a turn for the worse."
Performance of trust vs benchmark over 5-yrs
Source: FE Analytics
The Jupiter European Opportunities Trust is down 8.67 per cent over a one-year period, compared with losses of 22.33 per cent from its FTSE World Europe ex UK benchmark. It has also significantly outperformed its benchmark over three, five and 10 years. It is currently trading on a discount of 12 per cent.
"The bottom line is that the bad news in Europe is bad news for companies trying to generate money from European consumers, which includes Asian companies, or companies from elsewhere in the world, but not necessarily for companies listed in Europe," Tuite Dalton continued.
"Darwall’s portfolio is quite concentrated and he likes companies which could move their headquarters elsewhere."
"Cyclical companies depending on western consumer spending won’t do well for a long time."
Drake understands why investors are cautious about Europe.
"I think it’s a wait-and-see attitude. No-one is sure what’s going to develop in Europe from here so it’s just whether or not you want to dip your toe in the water or wait," he said.
Tuite Dalton, however, claims it is not just Europe investors are missing out on.
"We are launching a US equity fund. We think that even if valuations are not very cheap, if you compare them to what you get from gilts or other safe haven bonds in terms of yield and inflation protection, they are preferable," he said.
"If you were going to pick only one fund for an investor to get above-inflation yield returns from, I would say the Murray International Trust. The yield is 3 or 4 per cent but grows annually, so it is finding companies which can increase that dividend every year."
In January FE Trustnet research showed that Murray International Trust has increased its dividend every year for the past 28 years.