Fund Manager commentary - Henderson EuroTrust

05/04/2019

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​March was another positive month for European equities. Political news dominated and with further declines in bond yields, Financials were the worst performing sector and Consumer Goods the best. 

During March, we initiated one new ‘Special Opportunities’ position (Osram) and sold one ‘Compounder’ (Amadeus) and one ‘Improver’ (Deutsche Post). As a reminder, ‘Special Opportunities’ tends to be the smallest of the three investment categories that we will consider. We tend to spend more of our time trying to identical ‘Compounders’ and ‘Improvers’; the former is where we see returns as being high and sustainable and the latter is where we have identified the potential for returns to materially improve over the medium term. 

We see Osram as offering a compelling risk/reward at current share price levels. The market is well aware of the cyclical issues that the company are faced with at present. Osram produces automotive and general industrial lighting, associated components and semiconductors; all of their end markets are currently experiencing falling activity levels and as a result, the company announced a profit warned during March (their third in the last 12 months). With the market fixated on short term demand conditions, we see two points of attraction in the investment case. First, the company remain in advanced discussions with a number of private equity companies and we see a deal, if anything, as more likely following the recent profit warning. Second, we do not see their current difficulties as suggestive of a fundamental impairment to their long term earnings power – but this is what we believe that market is pricing in at these share price levels. 

The Spanish software business Amadeus has many attractive features and we have been shareholders for a long time. However, we sold our position in March for a couple of reasons. First, we feel that they have benefitted from a significant tailwind of strong global air passenger growth and we expect the next few years to be tougher than the last few in that regard. Second and more fundamentally, we question whether their market position in hotel software will ever be as good as their existing market position in airline software and the company is certainly priced for continued success. 

Deutsche Post is a business that we have long felt is under-earning and has the potential for improvement. However there are a number of reasons why we have wavered in that view over the past 12 months and after gradually reducing our position size, have finally decided to exit. First, we are worried that the Express business will begin to see some of the weakening end market conditions already being felt by its close peer Fedex. Second, the German legacy postal business is experiencing structural volume decline that is becoming more and more difficulty to offset with efficiency measures and the regulator seems to being far from supportive. Finally, cash generation has consistently disappointed versus our expectations. 

We have had a decent start to the year and will continue to try to identify the best opportunities for investment in a disciplined and systematic way.


These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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Please read the following important information regarding funds related to this article.

Henderson EuroTrust plc

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

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  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
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