European markets: Some stocks still shine on

We don’t know whether the solutions will work, or whether the ‘fiscal compact’, even if it could be agreed in principle, would hold together in practice. And the threat to impose an EU commissioner as a overlord for Greek fiscal discipline makes the unknown even more unknowable.

Maybe ‘Greek’ and ‘fiscal discipline’ just is an oxymoron. (Amount of state assets Greece promised to privatise: $65bn (£41bn). Amount actually privatised: $2bn. Number of state workers Greece agreed to sack: 30,000. Number actually sacked: 1,000. And so on.)

What we do know is that even good European stocks are, in many cases, still priced for the worst and over-sold. There are also many European stocks which have far superior prospects for growth.

For example, consider the broad sector called industrials. It contains stocks whose earnings are sensitive to movements in the business cycle, and in this macroeconomic environment you wouldn’t want to hold them. But the sector also has stocks with strongly recurring earnings. These companies are a different story altogether.

That explains why we have recently bought Schindler. From its headquarters in Switzerland, it makes elevators and escalators worldwide – not least in emerging, and growing, economies. Its recurring revenues come from maintenance and servicing contracts, and from what are called “traffic management” systems: high technology that recognises passengers and guides them to the elevator taking the fastest route to their destination.

Another industrial with recurring and highly attractive earnings is SGS. Another Swiss firm, it operates testing systems for products worldwide. It certifies that products, systems or services meet the requirements of standards set by governments. As we all know, the proliferation of government standards for everything from examinations to toothbrushes seems to be expanding exponentially. If that’s a grey cloud to some, it’s a silver lining for SGS.

A third industrial we like for its earnings is Spain’s Prosegur. Say ‘Spain’ and most people get out the garlic. But from its security and cash collection and transportation business Prosegur, once again, has growing and recurring earnings overseas. Its 2,200 armoured trucks travel more than 55m kilometres each year, collecting and delivering cash. Of the company’s earnings, 80 per cent come from Latin America. They are especially strong in Brazil and Argentina, where even inflation doesn’t scare Prosegur: it just means more money in circulation.

Meanwhile, as we’ve always said, Europe is much more than the eurozone. Poland’s economy is doing well. We are happy to have bought Poland’s Netia, which has its own fibre optic network offering broadband, content and fixed line telephones to Poles. There are tremendous opportunities for good, old-fashioned growth here.