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Italy Debt Crisis: Best Italian Stocks for a Rebound

By Jim Fink on July 13, 2011

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Concerns about the EU’s ongoing sovereign debt crisis have weighed on the Italian stock market, making it one of the best bargains in Europe.

– Yiannis Mostrous, Global Investment Strategist

It seems as if the U.S. stock market is influenced more and more by events occurring in other countries. Perhaps this is an indication of waning U.S. global influence and the increasing power of Asia and a unified Europe. It’s hard for the U.S. to remain a world leader when it is choking on massive government debt and is so politically polarized that its leaders in Washington are willing to risk a U.S. debt default!

Before today’s market rally – on news of strong Chinese economic growth and testimony by Federal Reserve Chairman Ben Bernanke that he is open to the idea of quantitative easing part 3 – the S&P 500 had suffered the worst three-day decline since the March Japanese nuclear crisis.  The reason for the market decline was a combination of last Friday’s extremely weak U.S. June employment report and continued European debt downgrades. Credit downgrades to junk status for both Portugal and Ireland have raised fears that the Greek debt crisis is spreading throughout Europe. 

But Greece, Ireland, and Portugal are all small, peripheral economies that aren’t that big a deal. What would be a big deal is if Italy were to suffer a debt crisis.  Italy is the seventh-largest economy in the world and the fourth largest in all of Europe (after Germany, France, and the U.K.). German and French banks have invested $36 billion in Greek government debt, whereas they hold four times as much — $150 billion — in Italian government debt.

Italy’s Economy is Too Big to Fail

Simply put, Italy is too big to fail. The country has a whopping $1.2 billion in debt maturing in 2015 and that amount of debt dwarfs the financial resources set aside by the European Central Bank and the International Monetary Fund to contain the entire European financial crisis. It doesn’t help that Italian Prime Minister Silvio Berlusconi is distracted by several financial and sex scandals and is known as the “man who screwed an entire country.”

Besides Berlusconi, the negatives swirling around Italy right now are:

Greece: 142.8%

Italy: 119.0%

Belgium: 96.8%

Ireland: 96.2%

Portugal: 93.0%

Spain: 60.1%

Some positives are as follows:

Italy’s Best Stocks

Assuming that Italy will weather the current debt-crisis storm, below are the nine best Italian stocks to benefit from a rebound in Italy’s stock market:

 Best Italian Stocks

Italian Stock

Market Capitalization

Industry

Eni (NYSE: E)

$80.3 billion

Oil & Natural Gas

Enel (Other OTC: ENLAY.PK)

$54.3 billion

Electric Utility

Telecom Italia (NYSE: TI)

$23.7 billion

Telecommunications

Saipem (Other OTC: SAPMY.PK)

$22.0 billion

Energy Services; 43%-Owned Subsidiary of Eni

Luxottica Group (NYSE: LUX)

$14.5 billion

Eyewear

Fiat (Other OTC: FIATY.PK) $12.4 billion Automobiles

STMicroelectronics (NYSE: STM)

$8.2 billion

Semiconductors; Headquartered in Switzerland but Large Operations in Italy

Natuzzi (NYSE: NTZ)

$178 million

Leather Furniture

Gentium (NasdaqGM: GENT)

$140 million

Biotech

Find the Best European Stocks with the Help of Global Investment Strategist

Global Investment Strategist lead advisor Yiannis Mostrous scours the globe for the foreign stocks with the highest return potential. They could be in Europe, the Far East, Latin America, or Africa.

Right now, Yiannis recommends a couple European stocks, one in his long-term growth portfolio and one in his metals and mining portfolio. One European stock in particular is an exclusive member of his “Top 5 Stocks to Buy Now” list. He recently told subscribers that he is cautiously optimistic about Italy because:

Italy is in much better shape than you might think. Although the ratio of Italy’s sovereign debt to its gross domestic product (GDP) is high relative to the core economies of Germany and France, the country runs one of the lowest budget deficits in the EU. The Berlusconi government has also enacted fiscal austerity measures that should reduce the deficit further and begin to pay down the debt. Plus, the Italian economy continues to grow.

To find out the names of his favorite European plays — along with all the foreign markets and individual foreign stocks Yiannis likes best right now — give Global Investment Strategist a try today!

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