06/16/97 BETTING THAT THE MAGIC WORD IN EUROPE IS 'PROFITS'

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BETTING THAT THE MAGIC WORD IN EUROPE IS 'PROFITS'

Mark L. Yockey likes the stocks of affordably priced companies whose earnings are growing 20% a year. That's why he's in love with Europe. The manager of the Artisan International Fund has two-thirds of his $425 million portfolio in European equities--and for good reason. ''For the first time, many European companies are focused on profitability,'' says Yockey. ''That will result in corporate profits growing much faster than the underlying economies.''
Although skittish shareholders in the fund redeemed some $5 million in the days following the recent elections in which French voters moved to return Socialists to power, the fund's European emphasis has served them well. From its inception in January, 1996, through May 30, 1997, it has returned 40%, compared with 12% for the dollar-denominated Morgan Stanley EAFE (Europe, Asia, Far East) index, the widely watched barometer of the performance of industrialized countries' bourses outside the U.S.
Yockey's biggest holding is Credit Suisse, the big commercial and investment bank that is undergoing a stem-to-stern restructuring to better compete worldwide. Although Yockey bought the stock at an inexpensive p-e ratio of 10 and it has risen 35% in 1997, its p-e is still only 13 times next year's estimated earnings. Another Swiss restructuring play is Novartis, the product of merged drugmakers Sandoz and Ciba-Geigy Ltd. Its stock has gained 25% since he bought it in January.
Yockey has also bet big on Scandinavia, home to an abundance of ''well-managed growth companies selling for low valuations.'' He has discovered a handful of deeply discounted media stocks, one of his favorite sectors. Among them are MTV, a Swedish TV production company, and Norway's Schibsted, one of the dominant media companies in Scandinavia, with minority positions in all of the regional newspapers. At a p-e of 12, Schibsted trades below comparable U.S. media stocks, which tend to hover around 15 to 20 times earnings.
Although Yockey likes the shares of some Asian companies such as Japanese pharmaceutical maker Sankyo Co.--up 15% so far this year--he finds many of the economies in the region ''unattractive.'' Due to large current-account deficits and dramatically inflated real estate prices in countries such as South Korea, Thailand, and the Philippines, Yockey will limit his exposure to the region. In the meantime, he'll be counting on Europe to deliver more pleasant surprises over the next five years.
By Kerry Capell in New York

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