European equities have outperformed their US counterparts by the widest margin since 2000 so far this year according to Morgan Stanley.
All of the major European indices have rallied this year. The German DAX index has risen nearly 17%. France’s CAC 40 has gained 11.5% and the UK’s leading blue-chip index the FTSE 100 has gained 4%.
In contrast, the S&P 500 has fallen over 4% year-to-date and the tech-heavy Nasdaq fell nearly 10% due to US recession fears and Trump tariff uncertainty.
Global bank HSBC (HSBA) has recently downgraded US equities (10 March) citing tariff uncertainty while turning bullish on European stocks following Germany loosening its fiscal rules.
Peter Oppenheimer, chief global strategist at Goldman Sachs research says: ‘The potential for greater fiscal spending following the German election, and a pick-up in European governments’ push to deregulate and stimulate growth means that, after all things may not be quite as bad as markets have been pricing.’
A great way to play Europe’s recent momentum is JPMorgan European Growth & Income (JEGI) which has returned 12% on an annualised basis over the last three years according to the trust’s latest factsheet.
The trust has an impressive investment team behind it comprising of Alexander Fitzalen Howard, Zenah Shuhaiber and Timothy Lewis who have a combined 65 years of investment experience.
Tim Lewis, co-manager of the trust tells Shares: ‘European equities are an attractive investment right now after a forgotten decade. Energy price hikes, the war in Ukraine had put off investors [before]. However, with the likelihood of a ceasefire in Ukraine and Europe now beating expectations [investors] are now talking about Europe once again.’
WHAT’S IN THE PORTFOLIO?
The investment team take a bottom-up approach to stock picking focusing on businesses which are better quality than the market is giving them credit for, following a similar approach to its popular stablemate JPMorgan Global Growth & Income (JGGI). They tend to ignore the noise from popular and recently volatile technology sector and will look to outperform in different market environments. There is a focus on the operational momentum of the business, i.e. are things improving at a macro and a micro level?
The trust’s top 10 holdings are mainly from defensive sectors such as healthcare, food, beverages and tobacco. The portfolio includes some pharmaceutical heavyweights like Danish pharmaceutical Novo Nordisk (NOVO-B:CPH), Swiss pharmaceutical Novartis (NOVN:SWX) and Swiss multi-national healthcare company Roche Holdings (ROG:SWX).
The trust also holds Nestle (NESN:SWX) and energy giant TotalEnergies (TTE:NYSE).
Co-manager Lewis says: ‘We see our [portfolio] as balanced in different market environments. We are neutral to the technology sector; we see opportunities in the banking sector post GFC (global financial crisis), and we are keen to champion consistent alpha for investors. We know investors want income and we offer an attractive yield of circa 4% to 4.1%.’
The trust which pays four dividends per financial year in July, October, January, and March has an ongoing charge of 0.66% per year and is trading at a rough discount of 8%.
HOW HAS THE TRUST PERFORMED?
The trust’s longer-term track record is good, returning 12.7% over five years and 9.6% over 10 years on annualised basis, outperforming its benchmark the MSCI Europe excluding UK.
Lewis mentions stocks the investment team are ‘particularly excited about’ which include Prysmian (PRY:BIT), an energy and industrial cables company which connects offshore wind farms to the electrical grid.
‘We’re also positive about the outlook for Publicis (PUB:EPA), the global media and advertising business, which is seeing strong top-line growth despite industry dynamics, as their data-first strategy has allowed them to win market share, growing almost twice as fast as peers since 2000,’ Lewis adds.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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