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Post by Fletchsmile on Jun 23, 2015 14:04:05 GMT 7
Worth remembering that along with the risks in Europe at the moment, come opportunities. Below is a decent article on risks and opportunities in European equities. Myself I think there's some good value there =============================================== Europe - risk and opportunity
Heather Ferguson | 22 June 2015 | A A A It is often tempting to focus on investment markets which have recently performed well. However, it is often more profitable to look at areas which have performed poorly and are therefore out of favour with other investors. Europe is one such example, and we feel there are currently many reasons to be positive. Over the past year, the euro has weakened relative to the dollar. This has provided a welcome boost to European companies as over 18% of their revenues are generated in the US. A weaker euro benefits European exporters as their goods become cheaper to the rest of the world. The collapse in the oil price has also aided Europe. It positively impacts energy intensive industries such as manufacturing and a wide variety of companies stand to benefit from reduced transportation costs. In addition, consumers are faced with lower bills at the petrol pump, which could benefit retailers as consumers enjoy higher disposable incomes. The possibility of a Greek exit from the euro zone is still a concern and could negatively affect equity markets. However, with Ireland, Spain and Italy now recovering, the fallout from a Greek exit is now considered to be less significant than it would have been this time last year. Deflation is an additional risk. Falling prices can stall a recovering economy as consumers put off purchases in the hope goods will be cheaper in following months. This can result in a perpetual cycle of falling prices which can be hard to break. However, the ECB's €1.1 trillion quantitative easing program aims to stave off deflation, and the early signs are encouraging, with consumer price inflation having rebounded from a low of -0.6% in January to 0.3% in May. Overall, we feel the opportunities available in Europe could outweigh the risks. According to our analysis, European stocks are undervalued in comparison to their global counterparts and in January reached a 38-year low relative to stocks listed in the US . Share prices in Europe have rebounded since this time, yet our analysis suggests many are still undervalued. contd. www.hl.co.uk/news/articles/europe-risk-and-opportunity |
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Post by Fletchsmile on Jun 23, 2015 14:21:07 GMT 7
As to how to participate in this area: My favourite European fund in this sector continues to be "Jupiter European Fund", which I've held for many years. It's top quartile over 1,3,5 and 10 years, and over 10 years. Over 10 years it has returned 227% almost double the IA Europe ex UK index return of 116% Alexandar Darwell is another strong fund manager, with over 10 years at the helm, who's beaten the index in 8 of 10 calendar years. It's covered in the article below from Trustnet, with Jupiter European discussed in more detail on the 2nd page of the article Funds that have completely dominated their sectors: Europe
www.trustnet.com/News/609123/funds-that-have-completely-dominated-their-sectors-europe/1/1/Interesting it notes that 70% of active managers have beaten the MSCI Europe Index ex UK over 3,5,10 years, suggesting as always to be very careful of the blanket statement that "most active fund managers under perform the index" and "low cost passive ETFs are better on average" etc. This is one sector where active management can really make a difference - in contrast to say US. |
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Jun 24, 2015 12:13:18 GMT 7
My favourite European fund in this sector continues to be "Jupiter European Fund", which I've held for many years. Personally, I generally prefer investment trusts over funds. For Europe I hold Henderson European Focus Trust (HEFT) and JP Morgan European Smaller Companies (JESC) (formerly JPM European Fledgling). I've held both for many years, and the latter for almost 25 years (since it was run by Flemings). In any sector I like to hold 2/3 in a "regular" investment, and 1/3 in small caps (or a similar alternative). HEFT has performed very well, beating Jupiter European and JESC over 5 and 10 years. The latter have performed similarly over these periods, albeit with JESC showing considerably more volatility. The attached report compared the three investments. Attachment Deleted |
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Post by Fletchsmile on Jun 24, 2015 15:33:16 GMT 7
Yes if you find an investment you're happy with that consistently beats the index and peers, stick with it.
Both Henderson and Flemings (later consumed by JPM) have a strong history in investment trusts. I used to audit several of the Henderson unit trusts and investment trusts 20+ years back.
I find it swings and roundabouts as to which is better when between unit trusts and investment trusts, and you made a good summary on one of the other threads.
One thing to bear in mind is that the investment trust performance at the moment is distorted a little by the fact that HEFT now trades at a premium to assets, and has probably benefited from a discount moving to that premium. When a downturn or crash hits, that premium often moves to a discount for a double whammy though: NAV falls and discount widens.
It can also mean ITs can be more volatile, eg in the discrete calendar year for 36m-38m back, Henderson dropped 14.8% in the year, JPM being a smaller company fund so more volatile again fell 29.9% and the Jupiter UT fell 6.2% in that year - movement in the discount was likely a factor. If someone is holding long term and can ride out the peaks and troughs then it doesn't matter so much. The danger would be someone buying now at a premium who needs to access the funds and unfortunately accessing them is during a downturn or crash.
On the other hand in the aftermath of downturns is when ITs can trade at significant discounts, they can add extra boosts for the bull runs that follow compared to unit trusts.
In the past, one of the things I used to do is switch between unit trusts and investment trusts of the same fund manager in the same sector, and whether there was a premium (favour UT) or discount (favour IT) was one of the factors.
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Post by Fletchsmile on Jun 24, 2015 15:41:13 GMT 7
I also hold a handful of blue chip European equities which is another way to play. Currently, I hold for the dividend yields, to avoid the charges of unit and investment trusts, and allows me to be a bit more nimble, plus when I think there are opportunities for being undervalued: eg Alliance (ALV:GR) and AXA (CS:FP) in insurance sector, both with divs >4% and P/Es 10 to 11. these have had a good run BMW (BMW:GR) and Daimler (DAI:GR) in the obvious car sector with great brands. Div yields have fallen now to just under 3% as they've had good runs, but yields of 2.8% and P/Es around 11 aren't exactly expensive for quality brands like these Cheers Fletch  |
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Post by Fletchsmile on Jun 24, 2015 15:49:18 GMT 7
A good example of an investment trust on a wide discount is JPM Russia investment trust - trades on a discount of 11.28%, While Russia was getting hammered the discount widened. On the other hand for someone looking long term, and buying now, when Russia finally does turn round that discount should narrow for additional gains. Very volatile ride in the meantime though.
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Post by Fletchsmile on Jun 24, 2015 19:04:55 GMT 7
My favourite European fund in this sector continues to be "Jupiter European Fund", which I've held for many years. Personally, I generally prefer investment trusts over funds. For Europe I hold Henderson European Focus Trust (HEFT) and JP Morgan European Smaller Companies (JESC) (formerly JPM European Fledgling). I've held both for many years, and the latter for almost 25 years (since it was run by Flemings). In any sector I like to hold 2/3 in a "regular" investment, and 1/3 in small caps (or a similar alternative). HEFT has performed very well, beating Jupiter European and JESC over 5 and 10 years. The latter have performed similarly over these periods, albeit with JESC showing considerably more volatility. The attached report compared the three investments. This brings out a very important point when comparing UTs and ITs: Out of curiousity I had a look at how much of HEFT's 10 year return was accounted for by the fund manager's ability as measured by change in net asset value (NAV), and how much was accounted for by supply and demand of the fund as measured by the difference in share price movement vs NAV movement. This is one reason measuring true fund performance of an investment trust (IT) gets messy, especially when comparing to unit trusts (UT) and why it's not always apples to apples Looking at the latest half year reports and annual accounts of HEFT: www.trustnet.com/Tools/PDFViewer.aspx?url=http%3a%2f%2fdocuments.financialexpress.net%2fLiterature%2f11471886.pdf%3ffundCode%3dITGEO%26univ%3dTwww.trustnet.com/Tools/PDFViewer.aspx?url=http%3a%2f%2fdocuments.financialexpress.net%2fLiterature%2f9855902.pdf%3ffundCode%3dITGEO%26univ%3dT10 years to 31 March 2015: NAV + 229.7%; share price + 289.3% ; so the gain in share price was 60 percentage points more than the NAV 10 years to 30 Sept 2014: NAV + 233.8%; share price + 286.0%; so the gain in share price was around 53 percentage points more than the NAV gain Interestingly HEFT beat Jupiter European by 47 percentage points on 10 years to 24 June 2015. Based on the above 2 data points, as unfortunately we don't have the 10 year NAV movement to 24 June, but probably similar 50-60 points that would suggest: 1) the net asset value movements in isolation, i.e fund manager performance are very similar over 10 years, if anything Jupiter is slightly ahead 2) almost all of the investment trusts "outperformance" is accounted for by a narrowing of the discount and then move to a premium, i.e a factor of supply and demand for the shares, rather than fund underlying performance 3) HEFT has gone from being an unloved fund at a large discount, to a very popular one at a premium. Prior to 10 years ago there must have been a period where moving to a discount caused a lower return than NAV, and was detrimental to the share price total return I'd still say all 3 are good funds, but this is important context to make a full decision. If one looks forward, it wouldn't be realistic to expect that sort of gain again in share price from significant discount to premium. If anything, once a downturn occurs share price movement is likely to detract from total return and add to any decrease in NAV. So any newbie to investment trusts needs to be particularly mindful of this. Another factor is to look at volatilities and betas: Jupiter's 1 year and 3 year betas are: 0.97 and 0.9; whereas HEFT is 1.06 and 1.03 Jupiter's 1 year and 3 year volatilities are: 10.38 and 10.41; whereas HEFT 13.79 and 12.42 These show HEFT as a more volatile (and hence riskier fund) relative to Jupiter. This then begs the question: If roughly the same NAV gain was returned over 10 years for Jupiter vs HEFT (Jupiter slightly higher), is it worth the extra volatility? As measured over 10 years Jupiter's risk adjusted return on NAV would be higher than HEFT's As mentioned, they're all 3 solid funds. But, it does raise some good points that simple UT vs IT return only comparisons of share price vs unit price don't give the full picture. I'd be happy with any of them continuing as they've done. But if investing in HEFT, someone needs to appreciate the impact of discounts and premiums on NAV and share price movements. Once a downturn hits the premium will be a drag on return. That 50% to 60% extra percentage points won't be repeated in the next 10 years, and every chance it goes the other way Generally from an investor point of view, when doing know your client questionnaires, ITs used to be regarded as a bit higher risk, and requiring a bit more sophistication in understanding by the investor As I say, I like ITs in some circumstances. They take a lot more work than UT's in understanding performance than ITs, and often have higher risk/volatility. The smart move 10 years back would have been to see the discount and foresee it changing. Tracking premiums discounts can also be a pain in the ars*, but can be a lucrative business, which is why once upon a time I used to switch between unit trusts and investment trusts by same manager of same sector.... If anyone looks at the thread Cheeryble started, we see that many IT's are now trading at premiums, so this is a point to be careful of. I think they could be a drag in future years, but these things can stay at premiums or discounts for years... bigmango.boards.net/thread/1280/worth-investment-trusts |
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Post by Fletchsmile on Jun 24, 2015 19:19:33 GMT 7
For anyone relatively new to Investment Trusts or looking to see how the discount / premium can affect return here's a useful table with HEFT as an example: Attachment DeletedIn 2005 the share price was 421p vs NAV of 470.4p a discount of around 10% - 11% An opportunity to buy and profit from that? Maybe, and: 2010 = 5 years later: 585.5p share price vs 645.9p discount of around 9% - looks like maybe it's narrowing? But in 2011 European stock markets fell and 2011 = 6 years later the share price was 493.8 vs NAV of 580p so the discount had now widened to 15% - not what someone was banking on. This meant NAV fell 10% in the year, but the share price fell 16% in the year - even more. So a bad year in the market for the fund was made worse.. Only in 2014 = a full 9 years later has it switched to a premium: 962p /share vs 956.7p NAV So yes the difference in share price and NAV discount can be a source of extra profit, but clearly also a source of extra loss, and you may have to wait some time to capitalise on that difference, during a rollercoaster ride Remembering also markets can stay irrational for long periods It doesn't detract from HEFT being a very good fund. For some it adds extra spice, but for others perhaps unwanted volatility. You can make extra from this, but is it worth the risk to you? |
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Post by Fletchsmile on Jul 6, 2015 19:29:53 GMT 7
Thought we might get an even weaker Euro than we did today.
Anyway, I'll be looking out for that and possibly adding a few European equities over the next few days if things don't go really pear shaped. Added a little to Allianz (ALV:GR) today - current and fwd P/E on BBerg both below 10 now, with a 4.92% yield and price/book under 1 (0.92). Euro stocks could be in for a bumpy ride, but think if we look back in a few years (famous last words) some of these stocks would have looked a decent buying opportunity (for the brave of course)
If EUR weakens that would also be good for BMW and DAI exports, so will be watching out for those too
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Post by Fletchsmile on Jul 10, 2015 13:19:01 GMT 7
Some thoughts on Europe and opportunities, in the article below (should add I'd don't necessarily agree with them). The following quote stuck out: "I’ve been bullish on European stocks for the past year based on their vastly cheaper valuations relative to the American market. I’m not quite willing to jump into the Greek market just yet, as there aren’t many liquid stocks to choose from, and those that are available aren’t quite as cheap as I’d like to see, given the macro risk. But, European stocks as a whole are a fantastic bargain, and the recent selloff presents a great buying opportunity"
Bit of a cop out that the first couple of recommendations were European ETFs, when it says stocks to buy. Towards the end though, the article does suggest a couple of stocks, including Daimler AG (DAI:GR) as mentioned earlier in this thread on div yield of 3% and only 10x earnings ========================================================== European Stocks to Buy When Europe Bounces BackGreece's turmoil presents buying opportunities for European stocksinvestorplace.com/2015/07/european-stocks-europe-bounces-back-ewp-vgk-ddaif/view-all/ |
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Jul 10, 2015 13:57:30 GMT 7
I think it's ridiculously naive to view Europe as a single entity. The UK is different from the Eurozone is different from Scandinavia is different from Emerging Europe. Even within the Eurozone the economies of the PIGS are very different from that of Germany.
And as a first pick, the ETF has 32.2% in the UK and more than 70% in just four countries (UK, Switzerland, France, Germany). It's hardly giving a balanced exposure to the whole of Europe. Add on the fact that the index it tracks is FTSE Developed Europe Index which excludes small cap stocks and is cap-weighted, meaning that larger companies are over represented (18.5% of assets are in just 10 companies), this seems to me a pretty bad recommendation. (If I'd been looking for something similarly broad, passive and cheap I'd much rather go for something like Dimensional European Value than this ETF.)
As for the quote that stuck out for me, it was "As of this writing, Charles Sizemore did not hold a position in any of the aforementioned securities." Nothing like putting your money where your mouth is, and that's nothing like putting your money where you mouth is.
Sorry, Mr. Sizemore. Must try harder.
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Post by Fletchsmile on Jul 10, 2015 19:23:50 GMT 7
Yes, I sort of liked the opening premise to the article, and the end, but there was quite a bit in the middle which was weak. Europe definitely looks cheap compared to the US. The US looks overvalued on most metrics anyone picks. I also feel there are some good bargains around in Europe, but wouldn't necessarily consider them fantastic, that's probably American hyperbole. A year back I thought they looked better value, and for the 4 stocks I mentioned earlier: ALV, CLS they're up 19% and 37% over 1 year; BMW +7% and DAI +26%, which gives a reflection of value a year ago if they've made those gains and still look good value. Adding to them now, they still look value, but it's nice to also be sat on that psychological position of gains and adding to winning positions. I can also assume the first pick as an ETF is down to that bias some Americans have for low cost ETFs, and when they look at Europe (including the UK) as a block that again reflects the approach of some just seeing the continent as one big block. Two key points for me there: 1) I really don't like including the UK, and tagging it along as Europe: - The UK stock market doesn't look a great bargain to me. Not as overpriced as the US, but not necessarily cheap either, although there are selected bargains. Somewhere in between US and Europe - While UK will be impacted by Europe as a key trading block, they shouldn't be forgetting: - UK has its own currency compared to EU, and more control over its own fiscal and monetary policy - UK economy is further along the recovery road than Europe - stock markets also reflect this - UK's QE is well under way, whereas EU is just starting out 2) I would take any of the active managed funds we've mentioned earlier in the thread as a way to take advantage of the situation. A blanket one Europe size fits all really misses so much Not really keen on the idea of Spain either. There may well be some bargains, but when you've got quality bargains in Germany, France etc I don't see the need to bargain hunt in Spain. They also mention a CAPE of 12 for the Spanish market, which again if there are quality German stocks around 10-11.... Of the stocks they mentioned: SAN - Banco Santander - I've really no appetite for most European banks. Not in the current environment, not with the regulatory pressures, and not with the extra capital they'll need on top of what they are still trying to rebuild from GFC TEF- Telefonica - may well be a bargain, and telecoms can be good for yield as well as defensive but on a P/E of nearly 22 for a Spanish company I didn't bother looking any further. Might well be a story behind that, but that's a P/E above Telstra, AT&T, Verizon etc Spain may well be a good market, but as one of the PIGS, when there are bargains elsewhere I've no great desire to put it on my radar screen. I'd rather have a decent European IT or UT and let an active fund manager do that for me. If there are any bargains to be had there, I'm sure they'll pick it up for me, and spread risk better than I can He rounded the article off OK though, talking about Greece, China and DAI, which out of all the ideas he thru up, that's the only one I'd put my money behind. As AyG says though, that's one more than him |
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Post by Fletchsmile on Apr 19, 2016 13:27:18 GMT 7
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Post by Fletchsmile on Apr 19, 2016 13:42:33 GMT 7
I'd also been looking for a while at European Assets Trust - which is an investment trust. It's a smaller/medium size companies investment trust with a decent dividend yield of around 5%, which is unusual for European equities. Unfortunately when I tried to buy some via StanChart Singapore's online platform, I couldn't. Their platform is pretty basic, but conveniently links to my bank accounts and is Singapore based = outside UK. I use it in Singapore for things like investment trusts, ETFs, shares, online, but not unit trusts as they can be expensive bought from Singapore, plus I can't do joint name account purchases/sales online for unit trusts - another system limitation. From time to time I come across annoying little things like this with them. Didn't want to buy it from the UK as I already have other European funds there. www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITEAT&univ=T |
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