For me, Eurovision is the ultimate in trashy TV – the one night in May I try to stay away from the box.
But I can not escape it completely. Apparently, this year marks’ the 65th edition, with 26 countries battling it out.
The UK has only won it once in the past 40 years – Katrina and the Waves in 1997, according to Wikipedia – although many pessimists would say that is because the rest of Europe does not like us, something I am sure Brexit would not have helped with.
But when it comes to equities, it is Europe that is unloved, as a slow response to Covid vaccinations and geopolitical concerns have seen it heavily lag the US and UK in recovery terms.
There is, however, hope on the horizon. Not only is strong manufacturing data coming through, but I recently read that European earnings could rebound by 50 per cent or so through this year and next, which should equate to a bigger bounce back than seen in other regions.
A broader economic recovery would also benefit Europe and its plethora of cyclical companies. Indeed, there is an argument that, as the strong recovery slows in the UK and the US, it could make Europe the next port of call.
But any recovery is likely to not just be on a country-by-country basis, but actually a company-by-company basis – experience to navigate this will be essential.
And you do not get much more experienced than John Bennett, who manages the Janus Henderson European Selected Opportunities fund. Bennett has more than three decades of experience, having previously worked at both Gartmore and GAM.
He uses sector analysis in his process, focusing on under-researched opportunities. The resulting high-conviction portfolio consists of mostly mega and large-cap stocks, with no style bias.
According to the fund's managers, the team’s investment philosophy is based on the belief that macroeconomic and sector trends travel globally. Early insights into the behaviour of European companies can be gained from understanding global market and industry dynamics.
The team also believes stock prices are mean reverting, meaning excess returns can be competed away over time. Conversely, badly managed companies (as opposed to bad businesses) may be neglected by investors, but often present opportunities.
Bennett seeks to capture investment opportunities through correctly anticipating change and inflection points in companies and industries – either for the better or for the worse. Patience and long-term commitment to these investments are essential to capturing gains from being on the right side of surprise.
Finally, the team believes capital investment drives value creation. Cash flow return on capital is the ultimate master of value creation; it either creates or destroys corporate value.
This investment approach seeks to add value at two levels: stock selection and sector theme selection, which are integrally connected. Each team member contributes at the stock and sector level by studying industry dynamics, analysing company fundamentals and conducting company meetings. This combination of industry breadth and company depth gives the team powerful insights into the marketplace.
