Long Read  

European smaller companies: Investing for today and tomorrow

The sectors driving growth

The sectors seeing growth often depends on where we are in the economic cycle, in conjunction with the structural trends and aims of society. 

Today, we are seeing the energy sector is back in vogue as a result of a belated reappraisal of energy policy across the western world, caused by the Russian invasion of Ukraine. 

Europe now obviously wishes to reduce its dependence on Russian oil and gas. This has seen both nuclear energy and fossil fuels come back into the conversation, in particular liquified natural gas as a possible alternative.

Even before the war the increased electrification of society – for example the move to electric vehicles and the increased use of renewable energy – has provided a healthy source of interesting investments. 

Currently, there is a huge pipeline of high voltage cable projects for the likes of Nexans and Prysmian. All offshore wind turbines ultimately need to be connected to respective national grids.

The opportunities small caps present investors – and why they should invest now

Small cap investing is all about finding niche leaders that will deliver growth; specific stocks that are providing solutions to current and future problems.

The next 10 to 15 years are likely to be very different to the years following the global financial crisis, a period of under-investment and declining productivity.

If society wishes to improve the latter and achieve aims such as reducing CO2 emissions, there will need to be a step change in investments in tangible assets.

Ollie Beckett is portfolio manager of The European Smaller Companies Trust at Janus Henderson