Gavekal Capital: Ursa Europa

Tuesday, April 8, 2014

Ursa Europa

With all the talk of bear markets (prompted by recent market weakness), we checked in with the MSCI Europe Index to see how its constituents are faring so far this year.  Indeed, a handful of European stocks are officially in bear territory, having declined 20% or more since the beginning of 2014:

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Many of the declines look as though they could continue for a while before finding support.  Below, each one is charted relative to the MSCI World Index:

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Underperformance of companies from the U.K. (where three of these bears are domiciled) and the Consumer Discretionary sector (again, a common characteristic of three of the above) is not especially surprising given year-to-date trends in these areas:

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Which companies might be approaching bear territory?  These names have all experienced double-digit declines so far this year:

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While weakness in a few names certainly does not speak for the entire region, we have to ask ourselves if the number of issues making 65-day lows can remain this tame:

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