3 Italian Stocks for Your Watchlist

Over the last few weeks, I've spent a lot of time analyzing the ongoing crisis in Europe. Unlike the economy here in the United States, which is improving, however slowly, the economy in Europe continues its downward spiral. Just last week, Spain reported that its unemployment rate rose to 23.6% in February, and data indicate an eighth straight month of contraction in the eurozone's manufacturing sector.

European equity markets have responded in kind. Over the last year, the primary Italian Index, the FTSE MIB, has lost nearly 30% of its value. With value investors in mind, I've highlighted three Italian stocks to add to your Watchlist, our free stock tracking service here at The Motley Fool.

1. Luxottica Group (NYS: LUX) -- Add to My Watchlist.
Started in a small town in Northern Italy, Luxottica Group is now the world's largest manufacturer of sunglasses and prescription eyewear. Its stable of house brands includes Ray-Ban, Oakley, REVO, Arnette, and Vogue. And its collection of licensed brands is a veritable who's-who of the fashion industry. Among others, it includes Burberry, Chanel, Dolce & Gabbana, Donna Karan, Prada, Tiffany, Versace, and Coach.

Luxottica is also the foremost retailer of eyewear around the world. In North America, it owns and operates a multitude of retail outlets including Sunglass Hut, LensCrafters, and Pearle Vision. And in South America, the group controls Multiopticas, a company managing more than 470 optics stores with brands like Sun Planet and Econopticas.

The stock trades for 27 times earnings, and pays a 1.3% dividend yield. It's up about 24% since the beginning of the year.

2. Eni (NYS: E) -- Add to My Watchlist.
Eni is an Italian multinational oil and gas company, nearly a third of which is owned by the Italian government. While it's one of the smallest major integrated energy producers, it's nevertheless the 23rd largest company in the world by revenue, with 2011 revenues of $132 billion and profits of more than $8 billion.

One of the main concerns last year was the company's exposure to Libya, as the company has had a long-standing relationship with that country. According to its most recent annual report, however, 80% of its Libyan output is now back online.

The oil company trades for nine times earnings, and pays a substantial 4.6% dividend yield.

3. Telecom Italia (NYS: TI) -- Add to My Watchlist.
Founded in 1984 by the merger of several state-owned telecommunications companies, Telecom Italia is now the largest Italian telecommunications company. Domestically, it combines retail and wholesale fixed-line business with a larger number of wireless customers, as well as providing broadband service. Around the world, Telecom Italia has a big presence in Brazil, as well as serving Argentina and Paraguay.

The company carries a relatively cheap valuation of 6.5 times forward earnings, and pays a 5.6% dividend yield. Its stock is up slightly year to date.

Foolish bottom line
Investing in European equities right now is not for the faint of heart. The continent is embroiled in economic malaise and it remains to be seen whether the monetary bloc can even survive the storm.

That said, of the three, my favorite is Luxottica Group. It's an overwhelmingly dominant force in its industry, with scale all along the supply chain. Its economic moat consists of manufacturing plants in Italy and China, distribution centers located throughout the world, and retail locations under a variety of brands. And while the economic turmoil in Europe may injure demand there, a depreciated euro -- or a reinstituted lira, for that matter -- will only help exports from companies like Luxottica.

If you nevertheless lack an appetite for risk, then check out the companies identified in The Motley Fool's free report: "3 American Companies Set to Dominate the World."

For more on international stocks, check out these articles:

At the time thisarticle was published Fool contributor John Maxfield does not have a financial stake in any of the companies mentioned above. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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