Concerns about the European recovery have put the brakes on returns from holdings in Jon Ingram’s European equity fund.
But the JPMorgan Asset Management fund manager is sticking with the stocks, which include Renault, BMW, Daimler and Continental, saying they offered “tremendous ‘snap-back’ demand, long overdue”.
Mr Ingram’s £247.1m JPMorgan Europe Dynamic (ex UK) fund has fallen into the third quartile of the European fund sector in terms of its six-month performance, after losing 2.7 per cent in the period to December 1, according to FE Analytics.
Shares of Renault have recently returned to the ¤64 (£50.47) level they were trading at in December 2013, while BMW’s shares have fallen 3.7 per cent since the start of July and Daimler’s shares are down 3 per cent in the period.
Continental’s shares have risen 8 per cent in the past year to ¤168.50, but this is still behind the 9 per cent growth of the MSCI Europe index.
“It has just not been the right environment to buy a new car, but as sentiment and affordability change, people will begin to finally purchase those cars they had deferred from buying,” Mr Ingram said.
The European car market could follow the same pattern that the US’s vast automobile sector did amid the fallout of the credit crunch a few years ago, the manager claimed.
The car market in the US stagnated for years – and some of the nation’s car makers in Detroit required government assistance to survive the crisis.
During that period the average age of cars in use in the country reached 11 years, before a rise in demand rallied the market and drivers returned to ordering new vehicles.
The average age of a car in Europe is nine years, according to Mr Ingram. He said that once a car reached 14 or 15 years of age, the servicing cost would often become more expensive than buying a new car and so purchases inevitably followed.
The fund holds about 5 per cent in car companies at present, with BMW and Daimler as Mr Ingram’s stocks of choice.
Elsewhere, he has taken profits on his pharmaceutical holdings, cutting down his allocation to the sector to 10 per cent from 15 per cent.
He said the stocks had performed well, but that pricing pressure was beginning to filter through from the US so he had reduce his allocations.
The manager has recycled that money into telecoms companies and plans to invest between 5 and 10 per cent in the stocks, which he said were “starting to see an increased demand coming though”.
