Fidelity European (FEV ) fund manager Marcel Stötzel points to where more bids could happen as mergers and acquisitions sweep the continent’s depressed but reviving stock markets.

This is a third video excerpt from our recent event with the fund manager.

If this whets your appetite you can watch the previous videos on Europe’s turning point and the importance of dividend growing stocks. Alternatively, you can watch the entire one-hour ‘Big Broadcast’!

Can’t watch now? Read the transcript

Gavin Lumsden:

A big contributor to performance last year was Philip Morris’ takeover of Swedish Match. In the UK we’re very conscious of overseas bids for cheap UK companies at the moment. How significant is mergers and acquisitions for you?  Were there other bids for portfolio stocks last year?  Are you seeing more come through?

Marcel Stötzel:

It was a great year for bids, actually and we do see more coming through and I’ll tell you some of the areas where I think that that might play through. So, we saw Atlantia, it wasn’t necessarily an overseas bid. We saw Philip Morris. We also saw Christian Hanson being acquired by Novozymes. All of which, only one of those three was overseas bids, obviously, but still talks to the theme of these stocks have fold off a lot and acquirers could well look at that.

Where do I think the most obvious next steps are is sectors where you have revenues that are largely dollar based, but you have costs that are largely euro based and the share prices, particularly in dollar terms, have sold off materially.

So, for an example that I would highlight is MTU, which we own. They make aerospace engines. They’re a JV partner of Raytheon. I would be surprised if Raytheon aren’t looking at this and saying, we could buy out our JV partners. As an aerospace company, almost all of their revenues are dollar linked and they’re German. So almost all of their costs are euro linked-, not almost all, a good chunk shall we say, of their costs are euro linked.

They’re looking at this and saying, I could buy a dollar for 80 cents, essentially. I don’t have any inside info, so if it gets reported tomorrow, please don’t report me to the regulator or anything, but that’s the space where I think that dollar euro mismatch for an enquirer would look at that and be very attractive.