Janus Henderson European Selected Opportunities Fund Q2 2018 report

Posted by Guest in Fund and industry updates category on 24 Jul 18

Market review

Our recent commentaries have highlighted our disagreement with the global synchronised growth narrative and the increasingly serious doubts we have about the general equity market upwards direction. During June there was evidence of further weakening of macroeconomic lead indicators as well as disappointing hard economic data.

This was accompanied by an intensifying trade war following the G7 summit, a rapidly weakening yuan, a bear market for Chinese equities, profit warnings in the European autos and logistics sectors, a hawkish Federal Reserve meeting, political crisis reaching Germany, an Italian government beginning to rattle market nerves, and an Argentina bail-out by the International Monetary Fund (IMF) almost a year to the day after the country issued a 100-year bond. Following a swift European equities market rebound from the February/March lows, this combination led to a sharp sell-off in the second half of June.

Performance review

The fund rose by 4.3% over the quarter compared with a rise of 3.4% in the benchmark index.

The top performer at a stock level was enterprise software vendor SAP which continued its run following strong results in April. Energy was the best performing sector in Europe over the quarter and there were positive contributions from Royal Dutch Shell and Galp Energia, where our energy exposure is principally concentrated. We do not have a strong view on the oil price, preferring to remain focused on stock selection. The main detractor was Swedish industrial company Trelleborg as the industrials sector sold off during the quarter. The firm reiterated its financial mid-term mid-cycle targets at its recent Capital Markets Day.

Discrete year performance Janus Henderson European
Selected Opportunities Fund (%)
FTSE World Europe
(ex UK) Index (%)
1 year to 30/06/2018    0.4   2.5
1 year to 30/06/2017   26.5 29.1
1 year to 30/06/2016     4.0   6.1
1 year to 30/06/2015     7.0    1.1
1 year to 30/06/2014   17.2  16.4
* Source: Morningstar, at 30 June 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

In the German utilities sector we added E.On which has made a takeover offer for peer Innogy following the divestiture of RWE’s stake. We believe the company is too cheap on stand-alone basis, especially given the highly regulated business mix, and far too cheap on a deal basis, with Innogy. In our view the deal makes good sense and is likely to complete with support from German politicians for the deal, a benign regulator, and a determined management.

We took a position in life science equipment manufacturer Lonza Group where we are attracted by its strong pipeline and increasing capacity. The company's portfolio transformation increases its exposure to health care away from lower-growth, more cyclical end-markets. Two Swedish spin-off holdings entered the fund: Veoneer, the electronics segment of key holding Autoliv, and construction and machinery manufacturer Epiroc from industrial group Atlas Copco.

We continued to reduce our banking exposure by disposing of Banco Santander, BNP Paribas and Societe Generale and trimming our positions in ABN Amro and DNB. We exited auto parts manufacturer holding Michelin to concentrate our exposure in Nokian Renkaat, which announced it is to increase Finnish capacity by 30% from 2019, an indication of continued healthy demand outlook. We sold our holding in British American Tobacco as the company reported 2017 full-year revenue and margins that missed estimates. Finally, a sharp rise in the share price provided the opportunity to dispose of our holding in chemicals distributor Brenntag.


While market sentiment has cooled off, we think it is too early to abandon our defensive positioning. In particular, the narrow breadth of the US market continues to worry us – FAANG stocks (the five most popular technology stocks) alone represent more than sixty percent of the year-to-date total return on the S&P500 Index. In our view, this leadership will be challenged and we continue to focus our efforts on stock specifics and trading discipline.

Janus Henderson Investors
201 Bishopsgate, London EC2M 3AE
Tel: 020 7818 1818 Fax: 020 7818 1819

Important Information

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Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

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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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