What Do You Think About the Underperformance of European Stock Markets? | 3min snip from Value Investing with Legends

Speaker 2
We want to ask you a little bit about your experiences as a teacher and what is that you think our students should know. Before we go into that segment of the conversation, as the European in this conversation, I wanted to ask you again about Europe. And you mentioned the big realities of many other firms in Europe that they still have a significant family ownership, many of them. And so on account of that, they don't have the best cost structure. But it has in the performance massively relative to other markets or significantly relative to other markets. When you attribute these two, this is kind of a long underperformance of European markets since the global financial crisis. What do you think went on that is just a certain debt magnitude that we have in Europe? What do you say that is behind this underperformance of European stock markets
Speaker 4
over the long run?
Speaker 1
I think a couple of things. I think number one, Europe was very scary between the sovereign crisis and also Brexit. There was risk of Europe breaking up. You brought up over the last 10 or 13 years. That took care of most of that period of time. And then once people realized, okay, Brexit is not going to bleed into the rest of Europe. Europe is not going to break up as the EU, at least not for this foreseeable future. The minute that that became accepted, you have this dynamic where tech took over the world. And tech in Europe did the same thing that tech in the US did. But if you compare MSCI world or S&P with Europe, the S&P was effectively fang for a long period of time, a number of years in terms of the impact on the S&P. I saw something yesterday that even now the S&P 500 trades at over 17 times in the S&P 494 trades at 13 times, looking at Europe, they didn't have that benefit as technology companies still flock to the United States for a whole host of reasons. So I think from a from here perspective, a lot of the things I mentioned before about what's going on in the US balance sheet versus Europe, I think play to Europe's favor and the value growth switch is happening. I'm definitely worried about the allocators out there in endowment foundation land and their exposure to the private markets at this time and what they need to do to fund their schools, et cetera. So I think the US has a lot more to handle in that regard. And Europe numbers have actually looked way less bad than people have been expecting, which is why Europe is finally now starting to outperform. From our perspective, just got back from a trip over there. Our CEOs are really seeing a lot of very good things happening under the hood. So we're cautiously optimistic, I would say.

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