Ollie Beckett, Fund Manager for TR European Growth Trust, discusses the latest portfolio activity, in particular how the team has chosen to stick with a value bias. Ollie also explains how a calming of tensions between the US and China could have a positive impact on European value stocks.
Q: What can you share with us about your activity over the summer months – any material changes to the portfolio, interesting additions or positions sold?
A: We've added a couple of names and I could mention things like Marel which is a food processing company or Karnov in Sweden which is a legal information provider but broadly the turnovers down. We've been sitting on a number of stocks we think offer very good value we've sold out of the more expensive names starting from last year.
Now that's starting to come our way in the market in September having had a very disappointing August where the manufacturing data was very weak. We're hopeful from here with maybe a little bit of fiscal policy and maybe the end of the Trade War, or the ratcheting down of the Trade War, that people will become a little bit more positive and some of these value stocks will start to outperform.
Q: You run a long list with around 140 companies currently held in the portfolio; what’s your process when it comes to keeping track of them all and deciding what stays in, gets sold or is added?
A: We've run with a long list for quite a long time so there's nothing new, we're used to tracking that number of companies. We want to maintain liquidity which is important even in a closed end fund. On a number of occasions we've been wrong and we need to be able to get out of a holding; but we will have a sort of formal review process of stocks that underperform and we go back and start again with a case and question ourselves and try to be cynical. And sometimes we might find a stock is relatively more attractive but you can expect us to run with a relatively long list.
Q: The negativity around Europe won’t go away, but then it’s understandable with talks of an imminent recession in Germany and negative interest rates sliding further. To what extent is Europe’s fate tied into the global trade tensions and do these factors affect your thinking around the portfolio in any way?
A: In Q2, Germany went into negative growth, manufacturing in particular has been very weak and the sort of so-called Trade War between China and the US well Europe's been very much caught up in it; Europe is very correlated to global trade and global GDP. So it's, weirdly, hurt Europe far more than the US and China. So any ratcheting down of those trade talks will help. And so I would actually be positive going forward that things will get better from here not worse.