Continental stocks look undervalued compared to the strength of their fundamentals, Investec’s Max King told FE Trustnet. With balance sheets, earnings forecasts and revenues looking relatively healthy, investors steering clear risk missing “the buying opportunity of a generation”.
One fund looking to take advantage of Europe’s low valuations is the £179m Aberdeen European Equity fund. It has returned 21% over three years, putting it in the top quartile for its sector. Manager Jeremy Whitley thinks that now is the time to buy European equities. He tells ThisisMoney.co.uk: “when you spend much of your time meeting firms, as we do, it’s difficult to understand why they aren’t valued more highly”.
Whitley picks stocks with competitive business models and strong franchises, such as L’Oréal, Schindler, Nestlé and Roche. The fund is weighted towards more robust northern European nations, with Switzerland (26%), France (21%), Sweden (13%) and Germany (12%) the four top.
However, the portfolio is also full of firms making profits globally. French supermarket Casino has expanded into Latin America and Asia, “where operations now account for half of the group’s profits”; Nestlé has a “suite of billion dollar brands, growing across the world”; and Danish diabetes products firm Novo Nordisk is growing on the back of the prevalence of the condition, Whitley tells Investment Week.
Overall, Europe is “unloved”, as Invesco’s Stephanie Butcher tells FE Trustnet. With firms marked down indiscriminately, this leaves “companies with international exposure at very attractive valuations”.
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Aberdeen European Equity top ten holdings
| Name of holding | % of assets |
|---|---|
| Nestlé | 5.7 |
| Roche Holdings | 4.8 |
| Linde | 4.5 |
| Casino Guichard Perrachon | 4.3 |
| Novo-Nordisk | 4.1 |
| Unilever | 4.1 |
| Schneider Electric | 3.9 |
| MTU Aero Engines | 3.9 |
| Fuchs Petrolub | 3.9 |
| Fugro | 3.8 |