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

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

News
Bill Gates, founder of Microsoft and co-chair of the Bill and Melinda Gates Foundation
businessUber, Snapchat and Facebook founders among those on the 2015 Forbes Billionaire List
News
news... and what your reaction to the creatures above says about you
News
Homer’s equation, in an episode in 1998, comes close to the truth, as revealed 14 years later
science
News
news
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

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Day In a Page

    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003