Olly Russ

Five world-class companies we hold in Europe

Olly Russ

When you think of continental Europe, it is hard to think beyond the political issues, continued Quantitative Easing and growing concerns about the pace of economic growth. Europe, however, deserves closer investigation as it offers the opportunity to invest in world-class companies whose products we use in the UK every single day.

 

Although we are familiar with the brands, people are often unaware of their European origin. We highlight below five stocks we own in the Liontrust European Income funds which have a significant UK presence, but may not always be recognised as European. They also perhaps highlight some of the more interesting economic aspects of the continent.


1. 
Thule Group


Thule Group


If you are the kind of person who enjoys nailing bikes on to the back of cars or piling roof boxes onto vehicles to fill with outdoors equipment, then you probably already have a Thule product. They are the global leader in roof racks, roof boxes and bike racks. In fact, one of every two sports and cargo carriers sold globally is a Thule product.

 

The company was originally founded in 1947 in Sweden and encapsulates an interesting feature of corporate Europe: when most people think of Europe’s engineering prowess, they rightly think of German industrial expertise. Less well-known is that Sweden has a very strong specialist engineering base, very much driven by exports, and assisted by the free-floating Swedish krona. Think Volvo and SKF – the world’s largest bearing manufacturer. Swedish engineering is synonymous with quality and yes, Scandinavian costliness, but you do get what you pay for – do you really want your roof box to spring open on the M4 and scatter your luggage across the fast lane?


2. 
Danone

Alpro


You will probably already be a consumer of some of Danone’s products as it is the number one global provider of fresh dairy products and plant-based products, as well as the leading European provider of advanced medical nutrition. Consider just some of their brands: Alpro, Actimel, Activia, Oikos, the water brands Evian and Volvic, as well as the baby foods Aptimil and Cow & Gate. The company is most famous for yoghurt, of course, but is also involved in foods which are notionally good for you.

 

Actually founded by a Spaniard in Barcelona, by 2005 the company had become so synonymous with French identity that a mooted takeover by PepsiCo in 2006 led to the preparation of the so-called ‘Danone law’ which designated the company as a strategic industry, and therefore immune from takeover. It would be a uniquely French idea to define yoghurt as vital to the national interest. Nonetheless, food and beverages are another European speciality – think of Nestle, Europe’s most valuable company, with its huge portfolio of brands, from Nescafe to Quality Street.


3. Roche

Roche


Swiss pharmaceutical giant Roche was the first company to produce vitamin C commercially and the inventor of the world’s first antidepressant drug in 1956. Since then, it has become a notable leader in anti-cancer research. Key discoveries in this area include Avastin, Rituxan and Herceptin.

 

Roche is the world’s largest spender on pharmaceutical research and redevelopment, spending near US$11.5bn last year alone. It is also known as the provider of Tamiflu, the bird-flu drug. In 2009, Roche acquired US biotech giant Genentech for nearly US$50bn, an example of how Europe can pull off mega M&A activity even in the US. Pharmaceuticals remain a key European specialism, dominated by fellow Swiss giant Novartis, French giant Sanofi (which also made a mega US$20bn US acquisition of Genzyme) and Danish Novo Nordisk, a global leader in diabetes care.


4. Kone

Kone


From small beginnings in 1910 as a Helsinki machine repair shop, Kone (Finnish for ‘machine’) has since grown to become a global leader in the elevator and escalator industry. With an estimated 200,000 people moving into cities each day – equivalent to 140 people every minute – global urbanisation has been a key driver of demand growth for new equipment from Kone.

 

Additionally, with over 3,000 patents across the business, Kone has been pushing innovation in the industry. New developments the company have pioneered include 24/7 remote monitoring of its equipment through its partnership with IBM’s Internet of Things platform, allowing more efficient maintenance scheduling, and more recently the launch of the world’s first tweeting escalator!

 

Industrial giant Thyssenkrupp also has a large elevator division, currently up for sale. A mooted purchase by Kone would lift the combined entity’s market share to almost double that of US leader Otis. The other major European brand in this market is Swiss-made Schindler.


5. 
Vinci

Vinci


If one had to guess the nationality of the largest construction group in the world, it is likely that France would not be the first country to come to mind. French construction group Vinci, however, dwarfs all its global peers with a market cap of c.€59bn. To put this into perspective, the second largest construction group, China State Construction Engineering, has a market cap of c.€29bn.

 

Set up by two engineers in 1899, today Vinci employs more than 200,000 people across over 100 countries, and has worked on major projects including the Grand Paris express lines, the Terminal 5 tunnels at Heathrow Airport, and more recently the world’s first fully recycled road, stretching from Pons and Saint-Aubin in south west France. As of this year, it’s also the proud new owner of Gatwick Airport. Who owns Heathrow you ask? That would be Spanish infrastructure group Ferrovial.

 

All use of company logos, images or trademarks in this presentation are for reference purposes only.


For a comprehensive list of common financial words and terms, see our glossary 
here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the European Income team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. Investment in the Liontrust European Enhanced Income Fund writes out of the money call options to generate additional income. These call options will be “covered”. Unitholders should note that potential capital growth of the Fund would be capped if these call options are exercised against the Fund and the Fund’s capital returns could therefore be lower than the market in periods of rapidly rising share prices.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Tuesday, October 22, 2019, 1:05 PM