Paul Casson

Mackenzie manager believes revenue growth will determine winners and losers in 2010.

Michael Ryval 5 February, 2010 | 7:00PM
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Paul Casson believes that European markets are very polarized, and has taken advantage of some mispriced equities.

"Anything cyclical, or exposed to the economic recovery, has shot up. Anything that is more defensive has lagged," says Casson, 36, manager of the $187.3-millionMackenzie Universal European Opportunities. "As a result, quite a valuation gap has opened. Some things that have been left behind have been unduly punished."

Utilities, and healthcare companies, for instance, have been left in the dust by energy firms and auto-makers. "There is a five-to-six price-to-earnings point difference between the two extremes, with cyclicals trading at 16 times earnings, versus 10 or 11 for the defensive names," says Casson, who is director, pan-European equities, at Henderson Global Investors Ltd. in London. "That is quite large for a [European] market that is trading at 13 times earnings."

A bottom-up stock picker, Casson last spring acquired cyclical names such as Netherlands-based ASML Holding NV, the world's largest maker of semiconductor manufacturing equipment. "It has 70% global market share, and benefits from huge barriers to entry," he says, adding that the industry was very depressed when he acquired the company last year and ASML's order book was almost empty.

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Michael Ryval

Michael Ryval  Michael Ryval, a regular contributor to Morningstar, is a Toronto-based freelance writer who specializes in business and investing.

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