3 Investment Themes for Europe


Europe has been out of favour with investors for many years and the coronavirus outbreak, with its devastating impact on economies, has not helped. “Being a European fund manager is tough,” says Francesco Conte, manager of the three-star rated JPMorgan European Smaller Companies Trust (JESC).

But Europe is home to many businesses that are world leaders in what they do and have sufficiently stable earnings to see them through the toughest periods. Those investors who can look to the long-term and find defensive businesses that can continue to grow, even in a lockdown environment, could be well rewarded. 

Indeed, Conte insists now is not the time to be selling small-cap stocks, but a time to be looking for opportunities. Here we look at three themes for European investors to consider: 

Sustainability

Conte likes sustainability as theme these days but admits that wasn’t always the case: “I was a bit of a dinosaur when it came to renewable energies. There was a period when you needed subsidies to be economical viable but then I met this Italian company called Far Renewables and realised how far technologies have come.”

Conte is particularly interested in solar energy, which has become significantly more efficient over the years. 

Another company he likes in the sector is Swiss SIG Combibloc (SIGN), which provides sustainable packaging, and is a competitor of household name Tetra Pak (TTEK). “In investing in these companies, I’m not accepting lower returns,” says Conte. “Businesses need to be creative and find new technologies.”

Meanwhile, Rory Stokes, manager of the four-star rated Janus Henderson European Smaller Companies, is interested in the opportunties as EU standards around engines for mopeds tighten up. He thinks a crackdown on emissions could stoke demand for new mopeds in the coming years. 

READ  Disney plots next-gen Star Wars

Stokes likes Piaggio (P1I), the owner of Vespa: “It’s a cool brand, iconic for what it does, but also quite cheap.” And with people being hesitant at taking public transport in the current pandemic, he thinks scooters could be the answer, particularly for city-dwellers where parking is an issue: “As a mode of transport, mopeds are well-placed to benefit from what is going on.” 

Health & Wellness

Wellness is a megatrend that has been thriving in the last years, as people are increasingly health-conscious. Conte likes two companies in the healthcare space: hearing aid retailer Amplifon (AMP), which has benefited from an ageing population in Europe, and Shop Apotheke, the number two online pharmacy on the continent.

He says: “I thought Shop Apotheke (SHOP) was very appealing, but a sort of ‘tomorrow story’, and who knows when will ever tomorrow arrive.” The outbreak of Covid-19, however, has proved the catalyst for this service as elderly and vulnerably people, unable or unwilling to leave home, need drugs delivered to their door. 

Stokes, meanwhile, likes GVS (GVS), a company that makes filtration products for facemasks, which unsurprisingly has seen a major boom in recent month – a trend set to continue as government’s consider making face masks compulsory in shops and public spaces. 

Also in his portfolio is Milan-based Carel (CRL), which produces softwares to manage ventilation, and Aker Biomarine (AKBM), a dominant producer of krill oil, a sustainable, high protein, source of Omega 3, sought after by the nutitrion-conscious. “Omega 3 is needed for healthy body function yet many people have a deficiency in it,” Stokes explains. “Aker Biomarine is harvesting krill in Antarctica, where there is a huge concentration of the tiny crustaceans, and is more efficient than its competitors.” 

READ  Overnight Markets: Wall Street climbs on fresh hopes for US-China trade deal

Technology

While many investors may associate top tech companies with Asia or the US, there are a number of successful firms in the sector in Europe too. Conte likes niche companies like SimCorp (SICRF), number two after Blackrock in software solutions for asset managers and insurance companies. 

Another favourite is Alten (AN3), a French consulting and engineering company, which has offices in 25 countries. He says: “These companies have not slowed down with Covid-19; its shows how essential its technologies have become for companies. It is not viewed as discretionary spending but necessity.”

Elsewhere, Stokes likes online Italian bank Fineco (FBK). “It’s a resilient business and has no physical infrastructure, meaning it was able to operate when other banks were struggling in lockdown.”

The gaming industry is another which has been a clear winner in lockdown and StillFront (STLFF) has been a key beneficiary. “As people have been furloughed, the demand for computer games has increased,” says Stokes. “There are lots of users who came back as well as many new ones.”



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here