Opportunity Knocks in Europe
09/22/2010 12:55 pm EST
A UK-listed fund has made a lot of hay by buying companies with exposure to emerging markets, writes Andrew McHattie in Investment Trust Newsletter.
On September 7th, Oriel Securities published a new note on the £177- million Jupiter European Opportunities Trust (London: JEO), which the brokers rate as a buy at 229 pence. They say the trust’s recently published final results for the year ending May 31st, 2010 shed some additional light on what has turned out to be a highly successful strategy and one they think is “ideally suited to the current climate.”
The note says: “Barring a permanent switching off of the quantitative easing tap and an end to accommodative monetary policy, we expect JEO to continue producing positive absolute returns, and given its current focus on companies that enable customers to cut costs, we expect the relative performance of JEO to remain resilient in most market conditions.”
While the trust does not have a global mandate, the brokers say the manager is clearly focused on companies that are globally diversified, especially in emerging markets. The manager believes the crisis in southern European economies looks set to continue, but for European multinationals, particularly those with domestic cost bases and overseas revenues, this should not prove a disadvantage. Indeed, the weaker euro could prove advantageous for some.
In the year to March 31st, the largest single contributor to performance was the holding in Vopak (Amsterdam: VPK, OTC: VOPKF), the Dutch-listed oil and chemical storage business which continued to benefit from strong secular demand growth for storage. The next biggest positive contributor to performance was NovoNordisk (NYSE: NVO), the world’s leading manufacturer of insulin drugs.
The most important new investments in the manager’s view were Aixtron (XETRA: AIXA, Nasdaq: AIXG) and Modern Times Group (Stockholm: MTGB). Aixtron, a business that Jupiter has followed for more than ten years, is the world leader in the manufacture of machines that make light-emitting diodes (LEDs). This is perceived as a growth business. MTG is a Scandinavian television company with both free-to-air and pay-TV in Scandinavia, Eastern Europe, and Russia.
Over the long term, the trust has outperformed both its benchmark and its peers. Active leverage is currently a manageable 12%, down from 40% in May 2009. Looking at the period since then, Oriel says: “Given JEO’s exceptional performance over the period (share price up 48%), the fact that we view it as well positioned for the current global macro backdrop, and reflecting the fact that it is no longer a high leverage play, it has become our preferred play of all the listed European funds.”