Stevenson doubles exposure to telecoms
Henderson European equities director Tim Stevenson has beefed up his exposure to telecommunications and bank stocks in a bid to capture the gains being enjoyed on the back of the region’s recovery.
Describing ongoing political and economic upheaval in Greece as “a relevant sideshow”, Mr Stevenson pointed to European companies’ improving corporate profits following a healthy earnings season.
The manager of the Henderson Euro Trust and the €4.7bn (£3.4bn) Henderson Horizon Pan European Equity fund said: “With energy prices also down, conditions look supportive for many companies.
“There is every reason earnings can continue to recover this year and next.”
However, Mr Stevenson acknowledged that much of the current market noise surrounded the question of whether growth names had become too expensive.
“In a world plagued by persistently low growth, those companies that can achieve slightly better growth are generally afforded a small premium by the market,” he said.
But he thought that on some occasions where the fundamentals looked right, the price could be worth it.
Telecoms firms are a case in point. The manager has more than doubled his allocation to the sector to almost 9 per cent of the fund, compared with 4 per cent 12 months ago.
Key holdings include German group Deutsche Telekom and the UK’s BT Group.
“There is better pricing power coming through, especially with improving 4G and broadband systems,” Mr Stevenson said.
He added that he continued to look for “good quality, consistent and reliable companies in which to invest”.
The banking sector was heavily out of favour for several years after the financial crisis, but the manager thought the recovery had renewed its appeal.
He said “margins are improving” and has raised his weighting in financials from about 18 to 25 per cent.
French firm Crédit Agricole, Dutch multinational ING Group and Barclays are among his top-10 holdings.
Overall, given the level of stimulus being pumped into the region via the European Central Bank’s (ECB’s) ¤60bn-a-month quantitative easing programme, Mr Stevenson is upbeat on the continent’s prospects going forward.
“I am confident growth will come through; quite clearly it has been picking up,” he said.
But he added that the resignation of Greek prime minister Alexis Tsipras, which prompted this month’s latest set of elections in the country, “deepens political uncertainty in Europe, with a consequent cost for markets in the form of higher short-term volatility”.
The manager said: “This has served to temporarily drown out positive developments in the region – a weaker euro, a lower oil price, a pickup in earnings and the ECB’s aggressive monetary stimulus programme.”
However, looking at the recent market volatility, Mr Stevenson described the events as a “healthy correction”.
He said: “The market is quiet given the time of year. It needed to happen.”