Liontrust European Growth Fund

November 2019 review

The Fund returned 2.8%* in sterling terms in November, compared with the 1.5% return from the MSCI Europe ex-UK index and the 2.3% average return made by funds in the IA Europe ex UK sector.

 

The MSCI Europe ex-UK Index reached its highest levels of the year in November as investors weighed up developments in the trade war. Sentiment surrounding a potential phase one agreement between the US and China appeared to oscillate almost daily. At one point, there were positive comments from both camps as the US suggested that it would consider rolling back existing trade levies, which helped send US stocks to record highs.

 

However, by month end the chances of a deal hung in the balance. This was after President Trump signed legislation supporting pro-democracy protests in Hong Kong, moving directly against China’s call to block the bill.

 

In equity markets, health care (+3.0%) was an outlier among the gainers in the MSCI Europe ex-UK Index, which was otherwise dominated by cyclical sectors such as IT (+4.4%), industrials (+3.2%) and materials (+1.9%). Utilities (-1.9%), communication services (-1.2%) and consumer staples (-0.8%) were the three worst performers.

 

SimCorp (+19.9%) stood out among the Fund’s holdings after delivering third quarter results ahead of market expectations. The asset management software provider said revenue was €117.4m, a 43% year-on-year increase, beating the €108m consensus estimate. The Q3 numbers included a large order with an Asian investment company, which was signed in December 2018. SimCorp maintained its 2019 guidance for revenue growth of between 12% and 17% and EBIT (earnings before interest and taxes) growth of 25%-28%.

 

German lender Deutsche Pfandbriefbank (+10.3%) lifted its 2019 pre-tax profit guidance to €205m-€215m following a strong third quarter. It had previously estimated pre-tax profit of €170m-€190m. Net income in the third quarter rose 43% to £70m, partly due to higher net income from realisations on the back of higher prepayment fees.

 

Lundin Petroleum’s (-6.6%) share price continued to decline after the Swedish oil and gas exploration issued third quarter results at the end of October. Although the headline numbers came in ahead of consensus forecasts, analysts highlighted individual disappointments across the group’s portfolio, particularly the Barents Sea well. A couple of broker ratings downgrades sent shares in Swedish mining and smelting company Boliden (-4.1%) lower. The stock has had a strong run during the second half of the year and analysts now believe that the risk-reward profile is more balanced with the reduction in capital expenditure priced in.

 

Danish brewer Royal Unibrew (+9.9%) adjusted its 2019 outlook to the top end of previous guidance. In August, the company forecast net revenue of DKr7.40bn-DKr7.65bn and EBIT of DKr1.44bn-DKr1.47bn. During the first nine months of the year the company saw a 5% increase in net revenue to DKr5.91bn, while EBIT rose 10%, with positive contributions from all business segments.

 

Outside of earnings reports, Subsea 7’s (+12.0%) shares shot higher following reports suggesting that Italian oil services company Saipem is considering a deal to merge the two companies. Although there were no confirmations of the reports, Subsea 7’s shares maintained the majority of its initial gains.

 

In November, we exited the position in Technogym due to a deterioration in its cash flow scores and added a position in French bank Societe Generale.

 

Positive contributors to performance included:

SimCorp (+19.9%), Moncler (+13.8%) and Subsea 7 (+12.0%).

 

Negative contributors to performance included:

Lundin Petroleum (-6.6%), Neste (-6.3%) and Boliden (-4.1%).

 

Discrete years' performance** (%), to previous quarter-end:

 

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Liontrust European Growth I Inc

-3.0

6.8

16.7

30.0

4.3

MSCI Europe ex UK

5.8

1.3

21.4

20.0

-1.6

IA Europe Excluding UK

2.2

1.9

21.9

18.4

3.6

Quartile

4

1

4

1

2


*Source: Financial Express, as at 30.11.2019, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

**Source: Financial Express, as at 30.09.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.

F
or 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 Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 

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.

Thursday, December 12, 2019, 10:25 AM