Eurozone fiscal problems have prompted investors to dump equities in debt-laden peripheral countries, yet some of those battered stocks could appeal to the braver investor because of their high overseas sales.
A weaker euro, partly a result of the debt problem in Greece will be a boon to companies in those peripheral countries seeking to export beyond the single currency bloc.
Some analysts argue the crisis has created opportunities for risk-driven investors to pick up stocks with fundamentals that set them apart from the majority of companies in the highly indebted countries but which have been unfairly punished.
Fiscal problems in Greece and intensifying concerns over budget deficits in Spain and Portugal have jolted markets, sending equities and the euro lower, and raising borrowing costs in some of the lower-rated eurozone countries.
Shares in Spain, Portugal and Greece are down 9.1 to 12.7 per cent this year on concerns over fiscal problems and subdued growth due to austerity measures and tax hikes designed to keep public finances in check.
"In this whole shakeout you will find opportunities because when you throw the baby out with the bathwater everything is dumped at first, and then you begin to get a differentiation and you can actually search for value," said Andrea Williams, a fund manager at Royal London Asset Management.
Investors could consider Spanish banks which have felt limited impact from the country's property slowdown, she said, citing Banco Santander and BBVA as examples.
Underlining the need to be selective, the fund manager added that investors should avoid Banco Popular, which has high exposure to the troubled Spanish real estate market without the offsetting impact of a large overseas business.
Emerging market exposure was also a key issue to consider, as companies with a strong emphasis on growth outside the region are seen as better placed to weather domestic economic storms.
Telecommunications firms Telefonica, Portugal Telecom and Greece's OTE have significant portions of their business in Latin America and Eastern Europe.
Likewise, activities at oil majors such as Repsol and ENI are also international in focus.
While some companies may have been harshly judged in the wake of the turmoil, those which sell products and services in dollar-denominated markets will gain from a fall in the euro of more than five per cent against the greenback this year.
"Companies within Greece and Spain that have a lot of sales outside of the eurozone are benefiting from the euro's weakness as a result of this crisis and some of those may well have been oversold," said Gareth Williams, equity strategist at ING.
"More domestic, cyclical stocks in those countries are going to continue to face pressure because of the required fiscal adjustment and austerity measures that are needed," he said.
Greece's budget deficit swelled to 12.7 per cent of gross domestic product in 2009 - far exceeding the European Union's cap of three per cent.
Many of the more internationally oriented PIIGS companies also trade at a significant discount to their sector.
OTE, for instance, carries a one-year forward price-to-earnings (P/E) ratio of 8.5, according to Thomson Reuters data, cheaper than the European telecom sector at 10.
In fact, analysts at UBS found equities in Greece trade at a greater P/E discount to their 20-year average compared with their peers in Italy, Germany, UK, France, Spain and Portugal using estimated 2011 earnings.
Spain, however, offers an excess dividend yield over the 20-year average of 1.68, compared to 1.14 for Germany and 0.78 for France, according to UBS.
"Do we suggest you load up on Spanish, German and French equities in today's backdrop? Not necessarily. But we do think the risk/reward package is much better. All else being equal, compelling valuations are another form of protection against disappointment," UBS analysts wrote in a note.
Among Greek stocks, UBS highlights Europe's biggest betting firm OPAP and Alpha Bank as among its most preferred stocks.
OPAP has fallen 0.5 per cent this year, compared to a 4.4 per cent rise in the European travel and leisure sector.
RLAM's Williams said that while OPAP could succumb to weakness as salaries in Greece come under pressure, the cash generative aspect of the business makes it attractive.
However, investors could be reluctant to dive into equities in peripheral eurozone until a clear solution to the debt problems in Greece can be found, with aid from EU countries or support from the International Monetary Fund among the possible outcomes.
"They have been unfairly punished but the problem is that until we get a sense of how they're going to resolve the situation in Greece I don't think you would go in a big way," RLAM's Williams said. Harpreet Bhal, Reuters