A professional investor tells us where he’d put his money now. This week: Malte Heininger of Carmignac’s Long-Short European Equities Fund.
Europe is in a structural growth crisis. The world is gradually shifting from the “old economy” to the “new”, technology-driven one, and the European presence in this crucial sector is underwhelming, particularly among larger companies.
On this side of the Atlantic there is a distinct lack of companies on a par with the FANGs (Facebook, Amazon, Netflix and Google, now Alphabet) – major innovators that have upended traditonal markets and created new ones. Plenty of old-economy champions are feeling the cold winds of disruption thanks to digitisation and changing consumer behaviour.
Against this backdrop, investors need to look for the truly innovative, visionary companies with the ability to expand their presence in a low-growth environment and adapt to rapidly evolving circumstances. The winners will be those that boast strong business models and fundamentals in addition to leading products in underpenetrated markets.
Expanding overseas
One company that stands out in this context is Asos (Aim: ASC), a leading online apparel retailer in Europe. The outlook is encouraging: it has ample scope for growth in the next few years as the global online apparel sector is still underpenetrated.
What’s more, Asos provides a first-class customer experience. The company’s products are highly valued by clients, there is a huge assortment to choose from, and delivery times are fast. Asos also has a strong management team and a great track record of development. The company started in the UK, has expanded across Europe, and is now also entering the US.
Strong commitment to growth
Puma (Frankfurt: PUM) has also become a very compelling investment case. Although it is the number-three global sports brand with high brand recognition globally, it lags behind Nike and Adidas with only 2% market share. After experiencing success in the early 2000s, Puma then endured a difficult period, with rivals gaining market share in the key running-shoe segment, for instance.
However, it has now turned the corner.In the last two and a half years, Puma’s investment in its performance and promoting the brand has borne fruit:
last quarter, it reported 22% organic growth with increasing margins. Moreover, the company is now also entering the North American market for basketball products in a move that demonstrates its commitment to future growth.
Attractive long-term prospects
Qiagen (Frankfurt: QIA), a fast-growing molecular diagnostics company, which addresses unmet medical needs through science and technology development, is another promising company. Healthcare as an industry lends itself to innovation, and given the non-cyclical aspect of the wider sector, biotech stocks will provide investors with stable returns in what is an increasingly volatile environment.
Qiagen has attractive long-term prospects given its strong positioning in growth markets such as biodata and companion diagnostics, and a high percentage of its revenues are recurring. We’re not the only ones who foresee a bright future for Qiagen: the stock has outperformed the market so far in 2018.