The update below is authored by Janus Henderson Investors and reproduced, with permission, by Willis Owen.
The second half of March finally brought some consolidation to the rally in equity markets off the Christmas lows. In our view, it is possible that the correction will remain just that – a correction, limited in both time and extent. Investor positioning is still light, in particular in Europe which has seen the longest period of persistent investor fund outflows in over a decade. Policy remains very supportive, too. Some of the pessimism on the macroeconomic data that has now become quite consensual may need to be questioned. Since many of Europe’s economic problems last year were ‘made in China’, upwards-inflecting Chinese credit growth and survey data should lead to improving European earnings estimates.
The fund rose by 6.9% in the quarter compared with a rise of 8.0% in the benchmark index.
The top performer at a stock level was international brewer Carlsberg as the company released another set of solid results showing strong organic sales growth in the fourth quarter of last year. We have been impressed by Carlsberg’s management team since its appointment in 2015/16 and the position remains among the top holdings in the fund. On the positive side the fund also benefited from its materials allocation where building materials manufacturer Lafarge Holcim was among the top contributors to performance. Having recovered well from the 2018 sell-off we believe there is more to come as the market comes to appreciate the turnaround being executed by Lafarge’s first class management team. We expect 2019 to be a busy year for the company as the new team reshapes what was for far too long a sprawling, underachieving empire.
Laggards included Spanish bank Bankinter despite solid fourth quarter results in a difficult environment. Performance was also negatively impacted by our holding in information technology stock United Internet and a spike in its share price presented the opportunity to complete our disposal of the position, reflecting our concerns about the competitive landscape changes in the German mobile market.
|Discrete year performance
||Janus Henderson European
Selected Opportunities Fund (%)
|FTSE World Europe
(ex UK) Index (%)
|1 year to 31/03/2019
|1 year to 31/03/2018
|1 year to 31/03/2017
|1 year to 31/03/2016
|1 year to 31/03/2015
* Source: Morningstar, at 31 March 2018, nav-nav, net income reinvested, net of fees, Class I Acc shares, in Sterling. Past performance is not a guide to future performance. Prices can go up and down and you may not get back the amount originally invested. NAV = net asset value.
Fund activity review
Key activity during the quarter included the introduction of Swedish telecom company Ericsson as a meeting with a significantly changed management team gave us confidence in its continuing restructuring following a wasted decade. We also started a position in Finnish oil refiner Neste, a company which has achieved global dominance in renewable diesel thanks to its advanced technology and global sourcing capacity. Following a meeting with its management, we introduced Infineon Technologies. Often among the earliest stocks to anticipate green shoots, we believe this semiconductor company should benefit from the structural growth from electric vehicles and advanced driver assistance systems.
Further increasing our underweight position to the financials sector we exited our positions in ABN Amro, ING, KBC, Nordea Bank and Svenska Handelsbanken. Indeed, we view the banking sector in general as searching for a sense of purpose. In common with some other sectors, we consider most European banks to be in run-off. Finally, we disposed of E.ON, where we consider the outlook to be disappointing.
Perhaps the only theme we have implemented this year is a further reduction in our exposure to banks. Elsewhere, disposals should be seen in the context of our deliberate move to a more concentrated portfolio. This, in turn, reflects increased conviction at the stock specific level, as well as our desire to offer investors a differentiated, yet more active proposition.
Macroeconomic data has improved in recent weeks, in particular in Europe and China. The turn-around in global money creation is still nascent, but if it were to gather strength as indicated by the dovish communications of all major central banks it would further support the 2019 recovery after the 2018 growth scare. In such an environment, we would expect equity markets to rise. European markets in particular could rally given very light investor positioning.
Janus Henderson Investors
201 Bishopsgate, London EC2M 3AE
Tel: 020 7818 1818 Fax: 020 7818 1819
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Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. © 2018, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC.
All data as at date indicated, unless otherwise stated.
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