Mark Dampier: Time for Eurosceptics to think again

The Analyst
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The Independent Online

In my experience, one major investment area attracts little attention from private investors: Europe. It remains deeply unfashionable, unloved and unwanted, which is usually a buying signal to me.

Why isn't it more popular? Well, it's fair to say that we are not terribly pro-European in the UK. Many people see EU bureaucracy as a huge waste on a scale far bigger than our own system. Most of the continental governments are centre-left and not desperately friendly to the stock market either. Despite this, Europe has actually outperformed other developed market areas in recent years.

The fund I am highlighting this week is Jupiter European, managed by Alex Darwall, which has its followers but is still an underrated fund in an underrated sector.

The market recovery in Europe and elsewhere has been huge, and many share prices have risen 40-50 per cent just on an improvement in sentiment rather than anything fundamental. The economic problems that we are all going through have hit Europe as hard as any other area. However, things may not be as bad as we fear. For example, protectionism, which would hit global trade, has not been a problem so far. Global trade is down but not disastrously so.

What is more, emerging markets and niche industries continue to provide opportunities for growth and Alex Darwall's portfolio is invested in firms able to take advantage of this potential. The main point on Europe is a simple one: it has many leading global companies. Therefore it could pay to avoid getting too distracted by the politics, and focus on investing in some top quality companies that, by themselves, may be little influenced by how the European economy does.

Alex Darwall has seen companies implement significant cost-cutting, but there is also huge innovation going on. In addition, strong companies are getting even stronger as their competition falls by the wayside. You can even argue that the current backdrop is an excellent test of business models: if you can survive and prosper through the credit crunch, you will surely be able to survive just about anything else that is thrown at you.

An example of the fund's holdings is Novozymes. It is the producer of a natural enzyme that has industrial uses, speeding up processes, and making washing powders stronger and the brewing process more efficient. The company is also a beneficiary of the bio-ethanol story in the US; it is effectively a tremendous green play that takes out toxic chemicals found in many processes.

Vopak is a leading company in the storage of chemicals and oils, an area you may think has been suffering as chemicals themselves are a declining industry in the developed world. However, even though the flow of oil continues to increase, no one is building new refinery capacity in the developed world so storage is becoming more important.

Another firm Mr Darwall likes is Oriflame, a Swedish company which is an expert in the direct selling of cosmetics – like Avon in the UK. It operates in 61 countries, one of the biggest of which is Russia, but it also has a presence in Iraq. The company actually has 3.1m direct customers and hundreds of re-sellers, which means nefarious elements have no real way to exert an influence because there are too many re-sellers for them to get any foothold anywhere.

If you study Alex Darwall's fund, it is clear that being in Europe is almost inconsequential to whether it will do well or not. He only invests in quality global leaders and the proof is that the performance of the Jupiter European Fund under his tenure has been superb. It is up 50.18 per cent since the start of 2001 compared to a rise of 7.18 per cent for the average European fund.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

yourmoney@independent.co.uk

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