It wasn’t only the British stock market that felt the force of the heavy investor sell-off towards the end of last year. Exchanges across Europe, from France to Germany to Spain, suffered amid the gloom, in their case compounded by fears of an economic slowdown across the European Union and the imminent end of a fiscal stimulus programme by the bloc’s central bank.
None of this did any favours for the Jupiter European Opportunities Trust, shares of which had hit a peak of 895p at the end of August last year before the sell-off began and then lost close to a fifth of their value.
The trust was launched in November 2000 and its main brief is to try to generate capital growth by investing in companies listed across European markets, including in London. It has been run from the beginning by Alexander Darwall, 55, head of strategy for European growth at Jupiter Fund Management, the investment group. With Mr Darwall planning to shed his responsibilities for managing other Jupiter funds, soon the trust will be the only way for investors to gain access to his investment strategy, which has generated strong returns, including at this trust. According to analysts at Numis, Mr Darwall has a substantial personal shareholding in the Jupiter European Opportunities Trust and is likely to continue to run it for at least the next five years.
His portfolio is an interesting one. Although it’s a European trust, many of the companies that he has chosen have strong global themes, such as Relx and Experian, the data and analytics companies, the Carnival cruise liner group and Adidas, the sportswear brand company. Some investors might find it rather concentrated. The top ten holdings account for just over 77 per cent of the total and its largest investment is in Wirecard, a German online payments group, which represents 14.6 per cent of the assets invested.
That can make for uncomfortable performance over the short term. Shares in Wirecard lost about 40 per cent of their value between late January and early February after it was caught up in allegations — which it denied — of a fraud at its Asian office. The shares largely have recovered since, but it does illustrate the potential pitfalls of holding such substantial positions.
More than a third of the portfolio is also listed in Germany, but this is far less relevant for it is the geographical spread of a business that matters more than the country of listing.
By sector, Mr Darwall is heavily invested in industrials, the financial sector and healthcare, but is relatively light in technology stocks and consumer goods. He has no holdings at all in oil and gas companies, which means that the trust missed out on the strong recovery in the sector over the past year and is one of the reasons that it undershot its benchmark over the six months to the end of November.
None of this seems to have got in the way of performance over the longer term. Mr Darwall may be down for the year to date, but he has beaten his benchmark, the FTSE World Europe Ex-UK Index over one, three, five and ten years. In fact, he has come in ahead of his reference index in 13 of the 18 years since its launch.
Shares in the trust regularly trade at a premium to the net value of its assets, but they aren’t at the moment. Up 1p to 817p yesterday, the stock is valued at present at a 0.45 per cent discount to its most recently estimated net asset value per share of 821.66p.
The dividend yield, at a historical 0.9 per cent, is light, but the regular outperformance of this trust makes it attractive, nonetheless.
Advice Buy
Why Strong track record over the long-term and the shares have dipped recently
SIG
Not many businesses can boast that they started trading from a converted ice cream van, but that’s how SIG began.
Founded in 1957 as Sheffield Insulations by Ernest Adsetts, it supplied insulating materials for homes and other properties to the trades. It now also supplies roofing products and has a division known as air handling that sells heating, ventilation and air-conditioning products.
It was listed as Sheffield Insulations Group in 1989 and shortened its name to SIG in 1994. As well as the UK and Ireland, which account for about 44 per cent of revenues, it operates in France, Germany, Poland and the Benelux region. It is a constituent of the FTSE 250 with a market value of more than £825 million and over the year to the end of December it generated pre-tax profits of £28.5 million on revenues of more than £2.74 billion.
Although its products are used in hospitals, offices and schools, SIG is hugely exposed to the homes market, particularly in Britain. This is not occupying the minds of investors, however. For the past year and a half the company has been undergoing a turnaround under a new management team to make it more resilient in its chosen markets. With a plan that has substantially reduced both debt and costs, SIG is aiming to cement its market share, lift like-for-like sales in line with its sector, generate a return on capital employed of about 15 per cent and a return on sales of about 5 per cent.
There are a couple of years to go, but the company is making progress, improving profits and margins in its most recent financial year and increasing its return on capital by a percentage point to 10.3 per cent. It is considering a sale of the air handling division, which analysts at Liberum reckon could be worth £219 million, the proceeds of which could wipe out its debts entirely.
Nevertheless, its recent successes seem to be built into the price. The shares, off 3½p, or 2.6 per cent, at 136p yesterday, trade on about 13 times Canaccord Genuity’s forecast earnings for a yield of about 3 per cent. Other sector picks, such as Travis Perkins and Grafton, offer more value.
Advice Avoid
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