Mark Dampier: An unfashionable area can merit a close look

The Analyst

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

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
    Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

    Laughter, but no tears, as Letterman takes his bow after 33 years

    Veteran talkshow host steps down to plaudits from four presidents
    Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

    Hozier's 'blasphemous' song takes Novello award

    Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
    Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

    Join the tequila gold rush

    The spirit has gone from a cheap shot to a multi-billion pound product
    12 best statement wallpapers

    12 best statement wallpapers

    Make an impact and transform a room with a conversation-starting pattern
    Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

    Paul Scholes column

    Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?