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With its debt woes, mass labor strikes and unpopular austerity budgets, Europe hasn't exactly been the poster continent for economic vitality of late. But for some investors, there's been one shining exception: a nation that has kept its economic engine revving even as its neighbors' have sputtered. And while this Oktoberfest-loving country does have some serious challenges looming, many experts think the winning streak can continue for a while, anyway.
This European dynamo is Germany, of course, and it has been a hot spot for globe-trotting investors for some time. Over the past 12 months, the DAX Germany's equivalent of the Dow Jones Industrial index rose 17 percent, 11 percentage points better than the broader Stoxx Europe 600. Germany's strong economic fundamentals helped to draw this investment; the country's gross domestic product grew at a 3.6 percent rate in 2010, the fastest clip Germany has seen since reunification in 1989. Economists predict growth will slow this year, to 2.5 percent but even that is expected to outpace the growth of its neighbors. "At the moment, looking at the GDP, Germany is the economic powerhouse of Europe," says Johannes Mueller, chief economist of DWS Investments.
To be sure, it isn't all blue skies over the Rhine. The country's leading political party has faced setbacks, and questions remain about how much aid Germany will give to flailing euro-zone countries like Greece and Portugal. Joel Wells, whose Alpine Global Premier Property closed-end fund invests in real estate companies worldwide, says both factors could take a toll on Germany's economy: "I don't see it as a long-term issue," Wells says, "but there are some headwinds in the short term."
Still, some experts say that even if the domestic outlook sours, German industries have an ace up their lederhosen: exports. Many German companies are "a safer, backdoor way to get at emerging markets," says Gary Anderson, comanager of the Scout International fund. Take luxury-car maker BMW, which took in $86 billion in revenue in 2010, a 19 percent jump from the previous year, largely as a result of flourishing luxury-car sales in China. Other investors are eyeing the industrial conglomerate Siemens. Although the stock has already risen 39 percent over the past 12 months, analysts say it should have room to grow, thanks to its strong sales in Asia, Eastern Europe and Latin America. David Marcus, CEO of Summit, N.J. based Evermore Global Advisors, says recent restructuring efforts at Siemens should also help Siemens boost profits, too.
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