Longer-term earnings for select high-quality European firms have not been impaired by the COVID-19 crisis, insists Jamie Ross, manager of Henderson EuroTrust (HNE).
As Shares outlined here in January, Henderson EuroTrust is a European fund with an excellent track record. Its objective is to achieve a superior total return from a portfolio of high-quality European investments (excluding the UK), while the investment approach is encapsulated in the tagline ‘seeking growth, quality and consistency’.
‘Over the past month or so, we have been taking the view that the economic impact of COVID-19 will be largely a 2020/2021 issue and that, especially for the high-quality companies that we favour, longer term earnings have not been structurally impaired,’ insists the rigorously analytical Ross.
The Janus Henderson Investors money manager scours the market for large and medium-sized firms with strong market positions and balance sheets, generating high returns on capital and consistent growth, and which are run by high quality management.
‘If we are right, then the recent market weakness should prove to have been a significant buying opportunity for longer term investors. With the global, coordinated effort to slow the coronavirus pandemic, we can take the threat both very seriously and be optimistic about the future’, explains Ross (pictured below).
IN RUDE HEALTH
Ross says: 'Our positions in Novo Nordisk (the Danish pharma company) and Roche have both held up significantly better than the market,’ says Ross.
He also points out that Swiss drugmaker Roche is in the process of trialling a product called Actemra for use in COVID-19 patients with very severe symptoms while also working on testing solutions.
‘Another part of the market that has held up well has been capital-light, online business models; we own Scout 24, the German classifieds business, Delivery Hero, the German takeaway delivery company and Prosus, the Dutch-listed company which owns a large stake in the Chinese internet giant Tencent,’ says Ross.
WORST PERFORMING POSITIONS
Henderson EuroTrust’s worst performing positions have been ‘those with leverage, such as Unicredit, oil exposure (Total) or those which are clearly and directly impacted by the ongoing spread of COVID-19 such as Getlink, the Eurotunnel operator. We have tended to be underweight those areas most impacted.’
POST-COVID WORLD
As COVID-19 has continued to spread across the globe, Ross has been spending a lot of time thinking about what a post-virus world will look like.
‘There are many structural changes that will occur and we are considering these but those we think we are likely to see include, an increasing virtualisation of business life; an even faster adoption of e-commerce, with consumers increasingly preferring to transact online rather than in crowded shopping centres; and factory-heavy businesses moving to automate as much of their production as possible to enable them to survive in these kinds of environments.’
