Since Barron’s last screened the Stoxx 600 index for coronavirus-proof stocks with growth prospects, large parts of Europe have re-entered lockdown and Covid-19 deaths have continued to rise.
The second wave has well and truly hit Europe with Germany, France and the U.K. all several weeks into new lockdown measures. There is also doubt over whether the month-long lockdowns will come to an end as planned in December. Ministers in the U.K. have not ruled out an extension of the measures, while Germany has postponed a decision on its next steps until later in November. A French government spokesman said this week the country was “still far” from lifting restrictions.
Europe recorded 29,000 new Covid-19 deaths in the week of Nov.18, according to the World Health Organization. The WHO’s Europe director, Hans Kluge, said one person in the continent was dying every 17 seconds from the virus. Kluge did provide some hope, though, as he said new cases were declining due to lockdown measures.
European stocks have been buoyed recently by vaccine optimism following a number of encouraging updates from Moderna (ticker: MRNA), BioNTech (BNTX) and Pfizer (PFE), and AstraZeneca (AZN). The pan-European Stoxx 600 has climbed 13% so far in November. But even following an approval, a vaccine would not provide an overnight solution and there are immense logistical challenges in immunizing an entire continent.
Despite the positive signs, Kluge said: “There is light at the end of the tunnel but it will be a tough six months,” warning that Europe was once again the epicenter of the pandemic, along with the U.S.
To find European stocks well-placed to weather the Covid-19 storm and likely to grow in the years ahead, Barron’s screened for stocks that emerged from the first spike without too much damage: less than a 15% drop between Feb. 19 and March 23. A 15% fall, as experienced by Unilever (UN), may sound steep but it puts the stock in the top 7.5% of performers in the Stoxx 600 over that period.
The companies must also be in the green from March 23 to date, eliminating stocks that benefited during the crisis and have fallen back since. The final metric requires companies to trade at no more than 25 times forward earnings estimates.
Coronavirus-Resistant
Companies in the Stoxx Europe 600 index whose stock survived the coronavirus market rout earlier this year and were up from March 23 to November 19, while offering long-term earnings growth prospects.
Data as of Nov.19
Source: FactSet
Over the past month, Finnish pharmaceutical company Orion (ORNBV.Finland), has exited the screen. The company entered the screen at the end of October after its forward price-to-earnings ratio dropped below 25. However, in recent weeks its price-to-earnings ratio has climbed to 26.4 as the company’s forward earnings per share estimates dipped slightly.
U.K. food retailer Wm Morrison (MRW.UK) re-entered the screen following a strong share price performance so far in November. The U.K.’s fourth largest supermarket chain has benefited from England’s return to a month-long national lockdown due to end on Dec. 2. The stock has risen 15% since the country entered lockdown at the beginning of the month.
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