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Questor: the investment trust that sniffs out Europe’s ‘innovators and disrupters’
Questor investment trust bargain: JPMorgan European Smaller Companies’ experienced management team is adept at ‘kicking the tyres’ of the continent’s smaller stocks
British investors have been pulling their money out of Europe in recent months – and Questor has been no exception.
While savers withdrew £2bn from European funds in the first five months of 2019, according to the Investment Association, the trade body for open-ended funds, this column has advised readers to sell two investment trusts focused on the continent: TR European Growth in November last year and Jupiter European Opportunities in March.
In the former case our misgivings related to the economic outlook; in the latter to the fund’s very large holdings in particular stocks.
This has left our portfolio of investment trusts with minimal exposure to the continent at a time when many professional investors think pessimism about the European economy has become overdone and much of any downturn is already “in the price”.
“Europe is clearly out of favour and overlooked,” said Peter Walls, manager of the Unicorn Mastertrust, an open-ended fund that holds investment trusts.
“It’s a recognised fact that there are some exciting businesses in Europe whose shares are trading at undemanding valuations – valuations that look attractive when compared with American equivalents and long-term averages.”
He added: “The tendency in Britain is to think that Europe is not good at producing innovative businesses but this is not the case – it’s just that there aren’t many with the exposure of, say, Google.”
One investment trust that puts a lot of its money into what Mr Walls called “Europe’s innovators and disrupters” is JPMorgan European Smaller Companies, a holding in his fund. “About two-thirds of that trust is invested in businesses that I would call cutting edge,” he said.
Examples include Altran Technologies, an engineering and research consultancy listed in Paris, Ingenico, another French firm that specialises in secure payments, and Stockholm-listed Husqvarna, whose products include robotic lawnmowers.
He said the portfolio was well diversified, with about 80 holdings, and had particular exposure to Holland, Switzerland and Sweden.
Francesco Conte, the co-manager, has been with the trust for 21 years, while Edward Greaves joined him three years ago. “They are people I trust,” Mr Walls said. “They do a lot of kicking of tyres when they visit companies.”
Investors must expect higher volatility from smaller companies, not to mention extra ups and downs as sterling is buffeted during the Brexit end game. But Mr Walls said this was balanced by the well-established tendency for smaller companies to outperform larger ones.
“You have bigger ups and downs in smaller stocks,” he said. “There is more risk, so we should expect better returns, but you have to be prepared to hold for the long term.”
Questor says: buy
Ticker: JESC
Share price at close: 368p
Update: Macau Property Opportunities
When we spoke to Miton about infrastructure trusts last week we lacked space to cover the firm’s latest views on Macau Property Opportunities, which is in the process of selling its holdings in the territory.
“The Macau trust has been the most hit of our holdings by the US-China trade war,” said Charlotte Cuthbertson, an analyst for the Miton Global Opportunities trust. “Many casinos in Macau are US-owned, so it’s not great timing for renewing their licences.”
- Read Questor’s rules of investment before you follow our tips
This, and the arrival later this year of a new chief executive for the territory, is likely to put further asset sales back to next year, she said. “The portfolio managers have a lot of their own money in the trust and won’t want a fire sale,” Ms Cuthbertson added.
We paid 183p; the shares stand at 150p. But 20pc of the shares were redeemed at 262p in July 2018, making our loss 5.8pc.
Questor says: hold
Ticker: MPO
Share price at close: 150p
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