Each month, we look at the economic and investment world from a different view point…
June 2014: Stuart Mitchell from SW Mitchell Capital
With a political crisis to its east, a sluggish recovery and the threat of deflation, the Eurozone continues to sharply divide investor opinion. But, as fund manager S. W. Mitchell Capital has consistently pointed out, the region’s quality corporates offer value and growth potential. Founder Stuart Mitchell who, repectively, co-manages and solely run the St. James’s Place Greater European and Continental European funds, says that boardrooms are more optimistic, particularly in Germany and Italy. “Our company visits in April point to vigorous recovery across the region,” says Mitchell.
European financials have made good progress in the aftermath of the Eurozone debt crisis of 2010/11, argues Mitchell, and are well-placed to take advantage of improved conditions when they start to gather pace. “We still believe that the market has failed to appreciate the benefits of a rapid recovery in financial margins coupled with draconian cost-cutting and easing regulatory pressures,” says Mitchell. Strong retail banking franchises, such as ING and BNP Paribas, have caught his eye recently, offering a potentially rapid return to pre-crisis levels.
Mitchell sees the greatest investment opportunities in the more domestically orientated areas of the market. “Many of the best-quality international growth stocks remain too expensive, especially considering the many political and economic challenges facing the emerging world at the moment,” he observes. In contrast, there are domestic European companies still trading at discounts to their US equivalents of more than 50%.
The European investment specialist also holds stocks from the unfavoured periphery of the region, and Mitchell highlights Spanish property and construction group Sacyr, Madrid-headquartered banking group Banco Popular and Italian banking group Intesa Sanpaolo as examples of stocks that offer “great value” and is well- positioned to benefit from the region’s recovery. Mitchell has also started to favour utilities, and has made recent investments in French infrastructure group Eiffage and Telecom Italia. Favoured growth companies include German software multinational SAP and UK online food retailer Ocado.
Points and views
- Boardroom visits in April point to vigorous recovery across the region, says Mitchell.
- European financials have made good progress since the debt crisis, he believes.
- Mitchell sees the greatest investment opportunities in domestically orientated stocks.
- Periphery stocks offering “great value” include Sacyr, Banco Popular and Intesa Sanpaolo
The opinions expressed are those of Stuart Mitchell and are subject to market or economic changes. This article is not a recommendation, or intended to be relied upon as a forecast, research or advice.
The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations.
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