The Analyst: It's time to fly the flag for Europe again

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

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn