That, international investors say, is a question for politicians. From an investing standpoint, they say the focus remains, as it always should, on looking for value. In Europe these days, managers say that such a search is often leading them to companies with substantial earnings through exports-a business model that can be expected to benefit from a diminished value in the euro.
It also means looking past the problems of the so-called PIGS-Portugal, Italy, Greece and Spain-and recognizing that good investments do exist throughout Europe, even in these hot spots. One example: Coca-Cola Hellenic Bottling Company S.A., whose share price rose as the streets of Athens erupted into chaos, notes Thomas Shrager, manager of the Tweedy, Browne Global Value Fund. The company is expected to be one of the beneficiaries of a devalued euro, as it serves a market that extends to more than 500 million people in 28 countries.
Given the nightmare scenarios people have conjured for Greece, any investment in that country may be viewed as daring. But Shrager says the Hellenic holding is an example of sticking to investment principles and not being distracted by situations whose outcomes are unknowable.
"It's not that international investors are not conscious of the macro environments," he says. "We simply cannot predict things. In fact, we're humbled that we cannot predict things."
U.S. investors would serve themselves well if they stepped back and examined what they are really doing when they put assets into an international investment, Shrager says. "You're really making two decisions," he says. "You're asking yourself which stocks you are buying and you're asking yourself whether you think currency is going to strengthen or weaken."
Some international money managers say the currency situation has gotten so hairy it's not worth pursuing the second question, at least for the time being. Tweedy Browne, for example, has managed to stay ahead of its benchmark with maneuvers such as trading forward currency contracts. The aim, Shrager says, is to cancel out the currency equation altogether. "We try to eliminate the second part," he says. "We're simply saying, we don't know."
Federated Investors started to use similar strategies to hedge currency risk earlier this year, when Kaplan and her team noticed that currency values were acting erratically. "Historically, over two decades, when a country tends to have a strong economy, its currency appreciates," she says. Since the global financial collapse in 2008, however, that hasn't always been the case. Poland, for example, has been one of the fastest-growing economies in Europe in recent years. Yet its currency depreciated in 2008 and 2009, Kaplan says. Conversely, Japan, which has been suffering through years of economic contractions, saw its yen appreciate during the crisis.
"Currency stopped moving along the lines of countries or economies," Kaplan says.
As for equity holdings, Federated is overweight in Norway and Denmark and has a positive outlook on Germany, where it expects companies will grow earnings per share by nearly 40% over the next year-up from an average of 24%. "There is extreme European pessimism and that means you can pick up some bargain blue chip names," she says. "We believe that once the dust settles, market fundamentals will reassert themselves."
Among the companies Kaplan likes is the German engineering conglomerate Siemens, which she feels is an attractive way for investors to get exposure to the global economic recovery, particularly because it is an early cyclical business. Her team's global holdings also include Novo Nordisk, the Danish pharmaceutical company, and Piaggio, an Italian manufacturer of scooters and motorcycles, including the Vespa line of scooters.