JPM's Conte picks winners of 'next industrial revolution'

JPM's Conte picks winners of 'next industrial revolution'

Francesco Conte, who jointly runs the £718m JP Morgan European Smaller Companies investment trust, is backing companies he hopes will be leaders of the “next industrial revolution”.

Mr Conte has jointly managed the trust for 27 years, and said the level of political and economic certainty in Europe is “as high as I have seen it”.

The response has been evident in equity markets, with the AIC European Smaller Companies sector up 46 per cent over the past year to 28 November. The trust has returned 49 per cent.

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But Mr Conte said that while valuations have gone up, “they actually look only slightly above long term averages when measured on a price to book basis", because the company earnings have also risen.

"It is certainly the case that the market has gone up a lot, and the economy has performed well, but I think there is more to come.

"The key is that Europe is benefiting from a synchronised pick-up in global growth, and that benefits the exporting companies,” he said.

Future growth will be determined by the number of niche European companies exposed to technological companies, he said.

“Many of the companies have been around for a long time and when you hear what they do, you think, it’s not very exciting. That is how I viewed those companies for years, but they are able to profit from how technology is changing industry.”

He cited the example of Aumann, a German listed company.

Mr Conte said the business of the company, which only listed in March, to make the machines that make electric motors, is "not exciting at all".

"The industry suffered for years because those machines were hand made in emerging markets. But now, companies involved in electric car manufacture, need to know more about how the motors are made. Aumann supplies Tesla and the other big players in electric car manufacture, and that is a growing market.”  

The second company he mentioned is Data Logic. This is an Italian-listed company that makes barcode readers.

Mr Conte said the online retailers need this more than traditional retailers, representing a growth opportunity.

Paul Derrien, investment director at Canaccord Genuity, said he has been deploying more capital to European equities as economic conditions have improved, and political turmoil receded.

In his portfolio 13 per cent of the equity allocations is now to Europe.

Jason Hollands, managing director for business development and communications at advice firm Tilney, said Europe is one of his most favoured markets this year.

“Valuations of European stocks are no long as compelling as they were a year ago, but remain relatively attractive compared to US equities although that’s partly down to big differences in the sector profile of the European versus the US markets.

"The S&P 500 has over 22 per cent exposure to technology companies, whereas European markets have a much bigger skew towards more traditional and cyclical businesses.