Page 16 - DIY Investor Magazine | Issue 30

UNCOVERING EUROPE’S HIDDEN GEMS
Francesco Conte
Portfolio Manager
Edward Greaves
Portfolio Manager
JPMorgan European Discovery Trust plc
European equities are back in vogue, with massive fiscal and monetary support, economic re-openings, and a sizable valuation discount relative to the US. All of which provide an attractive macro backdrop for investor.
Capitalising on this exciting opportunity requires a flexible and dynamic investment strategy.
The JPMorgan European Discovery Trust plc invests in European smaller companies, seeking out entrepreneurial businesses that are often leaders in their market niches and/ or have growth prospects that are under appreciated by the market.
‘CAPITALISING ON THIS EXCITING OPPORTUNITY REQUIRES A FLEXIBLE AND DYNAMIC INVESTMENT STRATEGY’
Stock selection is guided by a disciplined investment strategy with a long track record of discovering Europe’s lesser known corporate leaders, providing attractive long-term return potential.
The trust is focused on bottom up stock selection but from this overarching investment themes often emerge.
These new structural growth themes often appear in the small cap space first which allows this trust to gain early exposure to new exciting growing companies.
Currently some of the strongest growth potential is seen in companies benefiting from the increasing focus on health and wellness, technology-driven disruption, and an acceleration in efforts to tackle climate change.
The trust has successfully benefited from previous global investment trends.
For example, the trust gained exposure to the opening up of China to luxury goods companies through investments in companies such as Ferragamo.
The trust also benefited from technology improvements in the medtech space via several holdings, including dental implant leader Straumann, while the move to digital downloads in the video games sector supported our holding in Ubisoft.
All these investments generated strong returns for the trust before being sold when the stocks became large caps, with the proceeds used to invest in new small-cap opportunities.
SMALLER STOCKS WITH BIG POTENTIAL
Notwithstanding some brief, but significant, periods of underperformance, the smaller European stocks, that the JPMorgan European Discovery Trust focuses on, have not only outperformed large caps in Europe over the long-term, but have also outperformed most other markets globally.
The MSCI Europe Small Cap Index is one of the best- performing indices in the world over the last two decades.
DIY Investor Magazine | Sept 2021 16