Adjusting to an uncertain market environment
Tom O’Hara, Portfolio Manager of Henderson European Focus Trust, provides an update on the investment company highlighting the key drivers of performance and the reasoning behind the energy allocation. Tom also touches on the threat of nationalisation and windfall taxes on energy companies
- It has been a challenging market environment for European investors, with higher inflation and interest rates continuing to weigh on sentiment. However, our significant exposure to the energy sector contributed positively to performance, with stocks benefitting from higher commodity prices.
- Nationalising oil and gas companies will be difficult, given that they are global businesses with limited European production. Moreover, it’s unlikely that windfall taxes will significantly impact shareholder returns as they will only affect 5.0% of these businesses operating cash flows.
- Barring any systemic financial accident, we continue to believe that at current levels, European equities are pricing in a ‘normal’ recession and that valuations are attractive. Consequently, we have been adding to holdings where we believe share prices have troughed.
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