Lots of good companies in Europe – portfolio manager
There are plenty of good investment opportunities in Europe in spite of all the gloom and uncertainty, said Tim Stevenson, director European specialist equities at Henderson Global Investors.
“There are some great companies in Europe which are extremely well managed, have got a very strong balance sheet, are paying out a fabulous dividend and still growing a profit at the end of the day. Which is a very compelling combination from a buying point of view,” he said.
Patience and careful stock selection are required. The problem, he said, is that patience seems to be in short supply among market participants. “There are too many people out there who think they can pile in the equity market, make 25% in a couple of weeks and then ride off into the sunset.”
Stevenson joined Henderson in 1986 and has been managing European portfolios since 1984. He has been involved in Henderson EuroTrust fund since its launch in 1992 and has been its manager since October 1994. He also manages the European portfolios of The Bankers Investment Trust and the Law Debenture Corporation. He describes his investment style as stock picking with a growth bias.
The EuroTrust fund stands at about £130m invested in well-known large and medium-sized European companies and aimed at investors looking for long-term capital growth.
“I know it’s unfashionable to say buy and hold, but it can work provided you keep a close eye on what’s going on. It’s not buy and neglect, but buy, monitor and hold,” he said.
He avoids financials, banks are out and insurance companies “are a pretty miserable investment”. He holds some telecommunications stocks though generally he does not consider utilities attractive.
He admits this is a conservative investment strategy focused on well established companies and markets. “I do not invest in the more esoteric emerging markets, I do not invest in Russia and far eastern Europe. We may invest in Poland, the Czech Republic, Slovakia, [and] the central European markets, but we haven’ had any holding in those for four or five years. We don’t invest in Turkey.
“I don’t see any reason to change that. I still find plenty of great opportunities to invest in standard classic Europe,” he said.
However, the crisis in the eurozone needs to be resolved. “The uncertainties [over the eurozone] are having a knock-on impact on the real economy. It’s threatening profitability.”
He does not believe the crisis will lead to a break-up of the eurozone, but there has to be a major restructuring of Greece’s debt without dragging down other European Union member states.
“Is Greece going to cause contagion and Spain will go and Portugal and Ireland, France and Italy, and the whole thing is going to break up. That is absolutely not my view. “
A restructuring of Greece’s debt is likely to lead to some write-downs for banks, but this can be managed. “The crisis cannot be resolved from one day to the next. You’re not going to get that, because there’s a political angle and it has to be palatable to the various countries.”