Key insights
- Across the continent, Europe hosts some of the world’s most exciting companies
- They include market leaders like ASM International, manufacturer of high-end semiconductor making equipment
- Over the long term, the trust has generated strong returns for its investors
In a world where investors’ eyes are firmly on large US technology companies, many European stocks are overlooked. Yet among them are global market leaders that should generate strong returns for investors in the years ahead.
That creates an opportunity to discover and capture undervalued opportunities, especially among Europe’s exciting small and medium-sized companies.
“You can buy European market leaders at a lower price, which could result in good long-term performance,” explains Mine Tezgul, portfolio manager of the European Assets Trust. “Europe is attractively valued and includes some great businesses, particularly those with a market value below EUR10 billion.”
The European Assets Trust is an easy way for investors to buy into some of the continent’s most exciting unnoticed smaller companies. Our portfolio managers, backed by the global expertise of Columbia Threadneedle’s investment team, search for smaller companies that are under-researched and under-valued. We specialise in finding growing, profitable businesses that are globally competitive.
For investors who have bought the Trust’s shares and held them for a long period, this diligent stock-picking means that an investor who had invested £1,000 in 1983 would today have more than £29,000. Part of that return has come in dividends, targeted at 6% of net asset value, which is paid from a combination of income and capital.
European Assets Trust 5 year cumulative performance as at 31 July 2024 (%)
1 month | Year to date | 1 Year | 3 Years | 5 years | |
|---|---|---|---|---|---|
NAV (debt at market value) | 5.56 | 11.08 | -13.19 | 8..84 | 35.47 |
Share price | 7.34 | 17.21 | 19.20 | 11.99 | 32.31 |
Benchmark | 4.74 | 8.48 | 12.69 | 12.01 | 43.95 |
Europe’s global market leaders
What kind of companies are driving this? An Irish housebuilder and a German ticketing platform give a sense of the type of high-quality growth stocks in which the trust has recently invested.
Let’s turn first to Cairn Homes, one of Ireland’s largest housebuilders: Ireland simply does not have enough houses for its growing population. That puts Cairn in a strong position: its landbank is worth more, house prices rise and the order book stretches over an even longer period.
Based in Germany, CTS Eventim is Europe’s largest ticketing platform for events: whether concerts, films or plays. Growing quickly amid a boom for live entertainment, it benefits from economies of scale. The company has managed the ticketing for the Paris Olympics and has signed the Los Angeles Olympics for 2028.
A long-term holding for the trust is ASM International, the Dutch manufacturer of semiconductor equipment benefiting from the ever-growing need for computing power. ASM’s technological edge protects it from the competition that might otherwise erode its profitability. As such, it has the type of economic moat that our team looks for in high-quality growth stocks. The team seeks businesses that generate strong cashflows and a return that exceeds the cost of capital.
What’s more, our target companies must have strong management. “We like them to be run by managers with a good track record of capital allocation who are properly incentivised,” notes Mine. “For small companies this is particularly important because capital allocation decisions have a fast pay-back.”
We are looking for companies exposed to long-term growth themes such as: health and wellness, sustainability, emerging growth and digitalisation. Mine and her team have recently added the themes of energy security and automation, in demand due to labour market shortages as many countries are bringing supply chains closer to home.
Over-looked and under-valued
Mine aims to invest in companies trading at inexpensive valuations. Counterintuitively, periods when Europe’s stock markets are volatile provide the perfect opportunity. “Volatility can be unsettling but we like to embrace it because it gives you the chance to add to great businesses at great prices,” she explains.
In 2024, for instance, market volatility gave Mine and the team a chance to buy Belimo, the global leader in field devices for energy-efficient control of heating, ventilation and air-conditioning system in buildings.
Like many of the other holdings in the European Assets Trust, small companies such as Belimo that are global leaders in their niches appear to be overlooked and undervalued. Exciting small and medium-sized companies like these have provided our investors with healthy returns in the past. The Trust is an easy way to access a carefully picked group of these exciting, dynamic and growing businesses.
Investment risks
The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested. There is no guarantee that dividends will continue to increase.
The value of your investment is dependent on the supply and demand for the shares of the Investment Trust rather than its underlying value. the value of your investment will not be the same as the value of the Investment Trust’s underlying assets.
Investments in smaller companies carry a higher degree of risk as their shares may be less liquid and investment values can be volatile.
The mention of a stock is for the purpose of illustration and should not be considered as a recommendation to buy or sell the stock.
Gearing is used for investment purposes to obtain, increase or reduce exposure to an asset, index or investment. The use of gearing can enhance returns to investors in a rising market, but if the market falls the losses may be greater.
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