A bounce back in oversold stocks saw BlackRock Greater Europe (BRGE ) finish 2023 in fine form after an ‘incredibly strong’ November pushed the portfolio 11% higher. 

Fund managers Stefan Gries and Alexandra Dangoor believe there is more to come as corporates kickstart a ‘modern era industrial revolution’.

Last week the investment trust reported net asset value (NAV) jumped 11.1% in November while the shares rose 12.5% versus a 6.3% increase in the FTSE World Europe ex UK index. That left it 14.5% higher in the fourth quarter with a 21.6% total shareholder return for the year, the second-best in its sector.  

The sharp fall in eurozone inflation from 2.9% to 2.4% sparked investor hopes that interest rates had likely reached their peak and ‘markets rallied from oversold levels after having lost ground from August to October’.

Gries and Dangoor said the market was ‘led by bond proxies such as real estate and risk assets, including IT, industrials, financials, and consumer discretionary’.

The trust’s overweight to IT was a significant contributor, as was its allocation to industrials. Semiconductor stocks BE Semionductor, STMicroelectronics, and ASML – which are all in the top 10 – rallied on improving smartphone demand data.

Specialist chemicals distributor IMCD gained as it forecast an uptick in volumes in the fourth quarter versus the previous three months. Shares in Partners Group, the Swiss fund manager behind Princess Private Equity (PEY ) benefited from an improving interest rate environment and outlook for fundraising activity.

The managers said they had spoken to the company’s chief executive who said funding was ‘more readily available’ and had an ‘optimistic outlook for deal making’.

While the pair consider the transitions the global economy is making from ‘Covid to post-Covid, inflation to disinflation, low interest rates to high interest rates’, they do not try and predict what will happen at the macroeconomic level.

In their monthly commentary of 2023, they said there was no reason for long-term investors to ‘be alarmed’ and noted that ‘corporate balance sheets are strong after 15 years of deleveraging, margins remain at healthy levels, and we may be at the foothills of an increase in capex spending resulting in a modern era industrial revolution’.

From a consumer perspective, household debt relative to assets is also low in large economies and ‘interest rate sensitivity is lower than in previous cycles, and real wages are growing’.

‘As investors, we must be forward-looking, we must anticipate areas of enduring demand and identify those special companies whose characteristics enable them to capitalise on this demand and, in doing so, benefit their stakeholders and shareholders,’ he said.

‘We remain optimistic about the prospects of companies held in our portfolio.’

BlackRock Greater Europe is the most highly rated of the seven trusts investing in Europe’s larger companies. The shares trades 5.4% below NAV, the narrowest discount of its peer group although in line with the trust’s one-year average. Over five years it has generated a total shareholder return of 97.1% that beats the 59.7% of the MSCI Europe ex-UK index, but lies second to Fidelity European (FEV ) which achieved 99.4%.