Lazard looks to Europe

Low valuations of strong European companies have become one of the benefits of the current trading environment as market volatility continues to take its toll on the region, according to Lazard's Aaron Barnfather.

Mr Barnfather, lead manager of the Lazard European Alpha fund, said a number of advantages had been created by the difficult market conditions.

He said: "Valuations are now at increasingly attractive levels, with cash-generative, high-quality companies sporting market-leading positions trading at a discount to their long-term value.

"Second, this challenging corporate environment means the strong are getting stronger - a corporate survival of the fittest is at work."

He said a range of high-quality companies across Europe was currently trading at low valuations in sectors including technology, food production and pharmaceuticals.

Mr Barnfather said companies that demonstrate sustainable profitability would win out against companies buoyed by cheap and readily available liquidity.

Companies with robust cash flow, strong brands, dominant market positions and solid balance sheets, he said, would survive the current market turmoil.

He said careful stock picking of companies with high financial productivity would help investors outperform their benchmarks over full market cycles.

Mr Barnfather added: "The value of quality cannot be underestimated in this volatile economic and investment climate."