Mark Dampier: An unfashionable area can merit a close look
Saturday 25 September 2010
When I mention Europe to investors, most tend to roll their eyes with a mixture of astonishment and shock. Why would you invest in a continent where certain countries are effectively bankrupt? Where politicians understand market forces even less than our own, and where people go on strike when the age of retirement is increased to 62? However, an unfashionable area is sometimes worth looking at closely, and a hard investment decision can often be the right one.
There are so many good-quality fund managers in Europe that investors are spoiled for choice. So when Mark Pignatelli took over the Smith and Williamson European Growth Fund in 2008, he must have known he had a difficult task. His own career at Barings and latterly at Schroder managing European funds was very successful. However, he left Schroder in 2004 to manage and run his own hedge fund business, a painful experience partly because he found shorting stocks wasn't suited to his talents.
At Smith and Williamson, he returned to more familiar territory. European Growth is a straightforward long-only fund, with around 40-50 per cent in the top 60 largest names in Europe and the remaining 50-60 per cent invested in other stocks irrespective of size, sector or country. Pignatelli is keen on meeting management, and in the past six months has met 200 businesses, doing much of his own research and using the meetings to find out what is happening in various industries and supply chains. In this way, he hopes to detect the possibility of positive earnings surprises. He looks for high-quality companies able to self-finance their growth. Finally, they have to be at an attractive valuation with a sound management strategy and a growing footprint in their respective industries.
While Pignatelli is very much a stock picker, he is also interested in the overall economic situation. Interestingly, it is here that he believes the consensus of opinion has never been so far away from the actual facts. He believes it is the US where the world's economic problems lie, and that Europe is decoupling from the States.
He also points to the many good things going on in Europe that are being overlooked by the market. For example, the growing consumer confidence in Europe is at odds with falling sentiment in the US. In particular, the performance of Germany is strong, and the combination of Australian raw materials and German finished goods is effectively building much of China. Germany this year is likely to export more to China than the US, which shows how slowly the American economy has been moving.
Now you may disagree with Pignatelli's views, but I suspect we will find out over the next two or three months just how strong the European recovery is, and there may be positive surprises in store. Germany, for example, is importing at twice the rate from the euro zone than it is exporting – good news for many of its neighbours. Pignatelli also believes a large fall in unemployment is about to happen, even in Spain, and in Ireland unemployment has already been falling over the past two months. He feels that this should all come through in the data quite soon, and, far from avoiding some of the weaker European countries, people should actually be buying into them as they offer compelling value.
Europe is often mistakenly seen as the backwater of the investment world. Yet it has many world-class companies which have prospered despite the well-documented economic problems in the peripheral nations.
Few, if any, are talking about the region optimistically. The travails of Greece have hijacked the headlines, painting an overly pessimistic picture. This should be seen in context. Although a Greek default on its borrowings is likely in my view, Greece represents less than 3 per cent of the European economy. It is impossible to know how much a default is already priced in by the markets, but I believe Europe is an interesting investment theme at present, and the Smith and Williamson European Growth Fund is one to look out for.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How couples can protect their financial interests when cohabiting
Authorities failing in hunt for 'most wanted' tax dodgers who owe HMRC £844m
Buyers beware of new-build home headaches
Dirty tricks in a divorce can cause some nasty surprises
A student's guide to financial survival: You don't have to drown in debt at university
- 1 Notting Hill Carnival: Woman shares selfie after being ‘punched in face for telling man to stop groping her’
- 2 Joan Rivers: 'Palestinians deserve to be dead'
- 3 Daily Show's Jon Stewart destroys Fox News for its Ferguson coverage
- 4 Botched ice bucket challenge leaves man critically injured after plane drops hundreds of gallons of water
- 5 Friends reunion: Jennifer Aniston, Lisa Kudrow and Courteney Cox perform mini sketch on Jimmy Kimmel Live
Exclusive: We share blame for creating 'jihad generation', says Muslim strategist
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
- < Previous
- Next >
iJobs Money & Business
£20000 - £30000 per annum + OTE £40 - £50K first year: SThree: SThree Group an...
£400 - £450 per day + competitive: Orgtel: My client, a leading bank, is curre...
£20000 - £30000 per annum + OTE £40-50K first year: SThree: The SThree group i...
£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony