Family firms remain resilient through early year volatility
Marc St John Webb and Philip Best are co-managing the Quaero Family Enterprise Fund at Swiss boutique Quaero Capital.
The start of the year has proved volatile and difficult for many family firms across Europe but they remain optimistic and resilient, implementing reforms where possible and seizing opportunities to expand at home and abroad.
Among the many European smaller companies we have met since January, there are no major worries about their current business trends. Economic growth has slowed in major emerging markets like Brazil, Russia and China, but the US continues strong and business trends are positive in Europe.
However, weak stock markets have dented confidence, reflected in more cautious outlook statements.
The largest contributor to the Quaero Family Enterprise fund’s performance has been the Wacker and Neunteufel families’ Wacker Neuson, which makes compact construction equipment.
The share price slumped last year after the company warned of slower sales in emerging markets where it has been investing for growth, but more recently it has risen by 9%. We felt the market over-reacted on the downside, so we used the weakness to add to our holding on a PE ratio of only 13 times earnings and less than one times book value.
Another good performer for us has been the Fumagalli family’s industrial gases company Sol Group, based in Monza Italy, where the share price has recovered from an unjustified sell off in January, rising 10%.
Investors were concerned at the weak industrial sector in Italy and that major steel producer client Luchinni had closed its operations. However, the Group’s medical division Vivasol grew 11% last year, and now has a very valuable 10% market share in Europe.
We took partial profits last year in Dieter Manz’s robotics company Manz Automation AG which makes high tech manufacturing lines for the production lines of iPhone components, lithium ion batteries and solar cells.
But we still like the company a lot. It is winning new business in the consumer electronics and battery divisions and sees a bright year ahead, particularly in China, where there is increasing demand for local manufacturing plants to boost productivity via automation.
The share leapt on the announcement that new Chinese partner Shanghai Electric was going to subscribe to a capital issue (at a premium to market prices) and take an initial 30% stake in the company.
This bolsters the balance sheet and, as China’s largest manufacturer of power generation equipment, Shanghai Electric is likely to become a major client for Manz’s solar thin film manufacturing lines and battery making equipment. Ultimately, Shanghai Electric will probably want to take control of the company.