Fidelity: ASML and these three European stocks are attractive

American equities are becoming increasingly expensive, but on the other side of the Atlantic, according to asset manager Fidelity, there are attractive opportunities. Fund manager Marcel Stötzel mainly sees opportunities at four European companies that can benefit from artificial intelligence (AI), the growing demand for electricity and higher defence spending.

Stötzel, who manages the Fidelity European Fund, cites ASML, Schneider Electric, Roche and Hensoldt as interesting long-term investments. In an interview with Morningstar, he explains why he believes European stocks have become more attractive.

According to Stötzel, the valuation differences between US and European shares have become exceptionally large. Similar companies often receive a significantly higher valuation on Wall Street than companies with a European stock exchange listing.

This offers opportunities, especially since European stock exchange companies are much less dependent on the European economy than is often thought. Only a third of the turnover of companies in the MSCI Europe index actually comes from Europe. The remaining two-thirds is earned outside of that.

In addition, European governments are investing more and more. According to Stötzel, Germany in particular has room to significantly increase spending on defence and infrastructure.

He also sees opportunities in high-quality growth companies. They have suffered from higher interest rates in recent years, but are now valued more attractively. According to the fund manager, this will allow investors to combine growth, quality and a reasonable price.

One of Stötzel's favorite stocks is the Dutch ASML. The chip machine manufacturer has an almost complete monopoly position in the field of EUV machines, which are necessary for the production of the most advanced chips.

Still, Stötzel thinks investors underestimate an important advantage: the ability to raise prices.

According to him, ASML has raised its prices less sharply than other companies in the chip industry. As a result, he sees room to catch up over the next two to three years. That could give revenue growth a significant boost.

Schneider Electric is also high on his list. The French company supplies electrical equipment and infrastructure for data centers and electricity networks.

The global expansion of AI data centers is creating a rapidly growing need for electricity. At the same time, many existing electricity grids are decades old and urgently in need of renewal.

According to Stötzel, Schneider can benefit from both developments. In addition, the company works with Nvidia and provides almost all the necessary equipment for data centers, with the exception of the chips themselves.

Stötzel also expects European banks to benefit indirectly from AI. By automating administrative work, they can reduce their costs and improve their profit margins.

Outside the technology sector, Stötzel sees opportunities at the Swiss pharmaceutical company Roche. While many competitors struggle to develop successful new medicines, he believes Roche has one of the strongest pipelines in the European pharmaceutical industry.

The company is also at the forefront of the application of AI in drug research. Stötzel does stress that the outlook in this sector can change quickly. Fidelity has previously sold its stake in Novo Nordisk due to concerns over the development of new medicines.

The fourth share is the German defence company HENSOLDT. Fidelity recently bought shares after the European defence sector underwent a firm price correction.

HENSOLDT mainly focuses on defence electronics, radar systems and technology for air defence. According to Stötzel, this fits in well with the growing European need for protection against drones and other modern weapons.

Germany in particular can play an important role in this. Stötzel expects the German defence budget to grow strongly in the coming years.

The fund manager finds Hensoldt more attractive than some larger defence companies, including Rheinmetall. Not only the expected growth plays a role, but also the price that investors pay for the share.