The Analyst: It's time to fly the flag for Europe again
Saturday 06 September 2008
I find that Europe generally tends to be an unpopular investment area with the general public. Now, I admit that the start of 2008 was arguably the worst period for European shares since the 1970s, so perhaps investors' hesitance is correct. However, over the long term it has been a superb area in which to be.
Perhaps the investor antipathy stems from Europe's barmy left-of-centre politicians and even barmier bureaucracy. However, as I have mentioned in previous columns, it is a mistake to equate politics, or even economic performance, with stock markets. Until recently, China's phenomenal economic expansion wasn't being translated into stock-market growth. Europe, on the other hand, has many world-class companies that have prospered despite the politicians.
One of my favourite funds investing in the region is Neptune European Opportunities. It launched in November 2002, but the current manager, Rob Burnett, took over in 2005. It is fair to say that at the time I had some reservations: he was undoubtedly extremely bright, but also young and I often look for experience in fund manager. My fears were unfounded – the fund has gone from strength to strength under Burnett's watch, and my opinion of him improves each time we meet. He has, of course, got the support of some highly experienced Neptune old-timers, including managing director Robin Geffen, chief economist Derrick Bartlett and Chris Taylor.
Neptune's process is based on global sector views. The aim is to assess whether each sector is likely to perform well or not, weight them accordingly, and then select the most promising stocks within each sector. The fund managers meet with the in-house economists and analysts to discuss these issues. In the European Opportunities Fund, Burnett is happy to buy wherever stocks offer the most attractive opportunities within the chosen sectors; it generally does not matter to him in which country those stocks are located. The only sector that is an exception is banking, where he believes the disparities between different counties mean that consideration must be paid to geographic location.
The heart of Neptune's success over the last year has been its sector analysis on financials. It was one of the first, if not the first, investment houses to recognise the problems in the sector. It has thus avoided the carnage in banking shares. However, it has not been totally wedded to this idea within the fund; over time, Neptune became conscious that being positive on commodities and negative on financials was an extremely fashionable view. In investment, the fashionable decisions rarely produce the best returns. In July, the managers felt that some adjustments were necessary.
The timing could hardly have been better, given that in the middle of July banks started to move up while the oil sector started to move down. Burnett therefore increased his exposure to financials but he believes this rally will run out over the next couple of weeks; he believes that the sector will struggle again towards late September and October. He will therefore look to exit his positions over the next few weeks.
He is looking for two things before he will become more bullish: the banks admitting that they still have problems and raising more money, and stability returning to the US housing market. This will allow stock markets to focus on future prospects with greater certainty. This year has been good for sterling investors because of the strength of the euro, but Burnett believes this will reverse over the next few months. This may sound like bad news, but he believes a weaker euro would be positive for European stock markets, which are particularly export-orientated (lessons here for the UK, perhaps?).
So remember that the bad times don't last forever, and that stock markets are likely to recover before the economy does. In my view, the Neptune European Opportunities Fund would make an excellent long-term investment.
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
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
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