As European markets surge on another wave of central bank intervention, we review the companies favoured by investors.

• The 641 European equity exposed ETFs are on track to post record jump in AUM after having seen $20.2b of new inflows
• EBITDA to price is the best performing factor in Europe with companies like Fiat and TUI scoring well
• Companies offering the best valuation have outperformed their low value peers

While the jury is still out as to whether Mario Draghi’s recent rate cut will boost the Europe’s anaemic growth, equity investors are reaping immediate rewards as the region’s main markets rally to levels not seen since 2007.

This central bank driven rally has echoes of last year’s US rally, raising the question of whether investors are in full risk on mode and whether they are increasing their exposure to the region or paring down their holdings in the face of the recent surging asset values.

Investors increasing exposure

Far from turning away from the recent surging market, investors seem to have an insatiable appetite for European assets. The 641 equity ETPs which track the region have seen $20.2b of inflows since the start of the year. Barely half way through the year, the asset class is well on track to beat 2008’s total inflow, when these funds added over $28b of new assets.

North American investors have driven much of this trend as the 61 North American listed European funds have experienced nearly two thirds of the total inflows. We have seen a strong appetite for European exposure coming from US investors since the second quarter of this year. While it’s hard to link the recent appetite for European assets to the central bank, last year’s strong easy money rally in North America drew similar inflows into the region’s assets.

Value firms outperform

While investors are clamouring for more European exposure, stock pickers have still managed to gain an edge in the current market as value shares have managed to outperform their low value peers.

Value factors make up 12 of the 20 best performing factors in the Developed Europe Universe since the start of the year, when measuring the difference in return between the shares offering the best and worst value.

This preference for attractively values shares was not seen to the same extent in last year’s US rally, which saw momentum come out as a much stronger driving force to value.

Best performing factor

The shares with the best Trailing Twelve Month EBITDA to Price Ratio have outperformed their worst scoring peers by the widest margin out of the Markit Research Signals universe. This deep value factor, which measures a company’s ability to generate cash from operations, has seen the best ranked shares outperform the worst ranked companies by 2.6% on average over the first five months of the year.

While most of the factor’s performance was recorded in March and April when the best ranked group outperformed their lowly ranked peers by more than 4%, the factor has still managed to provide positive insights into returns for the last five months running. As to the shares currently scoring well in the factor, we see financials as the most represented set of shares within the universe, comprising nearly a fifth of the best scoring 10% of shares. Bank of Greece and Portuguese firm Espirito Santo currently score the highest amongst the universe.

Investors remain wary of embedded value

The recent rally has not put off investors, who are clamouring for more European exposure in an echo of last year’s US rally. But in contrast to last year’s momentum driven US rally, European investors still seem wary of the value embedded within their investment. This could change however, should the ECB decide to ease even further, prompting investors to go for higher yielding lower value assets.