The information contained in this release was correct as at 31 January 2022. Information on the Company’s up to date net asset values can be found on the London Stock Exchange website at:
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 January 2022 and unaudited.
Performance at month end with net income reinvested
(20 Sep 04)
|Net asset value (Undiluted)||-14.2%||-13.0%||15.8%||84.2%||695.2%|
|FTSE World Europe ex UK||-5.2%||-3.3%||13.8%||41.2%||354.2%|
Sources: BlackRock and Datastream
At month end
|Net asset value (capital only):||585.83p|
|Net asset value (including income):||587.20p|
|Premium to NAV (including income):||0.5%|
|Total assets (including income):||£596.4m|
|Ordinary shares in issue2:||101,565,411|
1 Based on an interim dividend of 1.75p per share and a final dividend of 4.55p per share for the year ended 31 August 2021.
2 Excluding 16,363,527 shares held in treasury.
3 Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2021.
|Top 10 holdings||Country||Fund%|
|LVMH Moët Hennessy||France||7.6|
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV fell by 14.2% and the share price – by 15.0%. For reference, the FTSE World Europe ex UK Index returned -5.2% during the period.
Europe ex UK markets fell during January. The extreme market moves during January have been largely driven by top-down, macro narratives. A change in real yields has perpetuated a call for value over growth, leading to a sharp market rotation in the first half of the month with lower quality cyclicals being bought and higher quality companies sold. Towards the end of the month, markets turned towards defensives on worries over a slowing economy later on in the year.
Energy, financials and real estate were the strongest performers over the month, while all other sectors, particularly IT and industrials, delivered negative returns.
The Company underperformed its reference index during the month with both sector allocation and stock selection detracting from relative returns. However, importantly, the underperformance was driven by strong factor moves in the market rather than profit warnings or weak fundamental news. In fact, so far, the earnings season has started off positively with many of the Company’s high conviction names delivering strong results despite weak share price moves during January.
In sector terms, the Company’s higher allocation to technology and industrials detracted, as did a lower allocation to financials, telecommunications and utilities.
The vast majority of the Company’s detractors during January included higher multiple stocks which sold off while lower multiple stocks rerated. We highlight that the earnings trajectories of those ‘more expensive’, higher quality businesses in our portfolio remain incredibly robust. This has become increasingly evident through the ongoing full year earnings season.
The industrials sector was the largest detractor to relative returns over the period. An example of a stock caught up by the top down market narrative was Sika. Shares were down around 16%. Meanwhile, the company reported a 4% sales beat for Q4 with organic growth coming in at over 10% which was around 6% ahead of consensus. Beyond the recent positive results, they remain a world leader in specialty chemicals benefiting areas of construction and infrastructure expected to be well supported by green transition spend for years to come.
IMCD was also one of the largest detractors after having performed strongly last year. There was no stock specific news on IMCD which would justify the sell-off and, in fact, we spoke to several distribution businesses during the month, all confirming that the operating environment overall remains strong.
The health care sector also experienced a sell-off. For example, Lonza was amongst the Company’s largest detractors during the month. Shares were down around 17% in January, even though the company released 2021 FY results that showed revenue ahead of consensus, EBITDA in line, and guidance implying a 2-4% upgrade to expectations for 2022. The company is also adding about 30% new CDMO customers per year. Straumann and Polypeptide experienced similar weakness during January.
Equally, the Company’s positioning within technology was negative. Shares in semiconductor-exposed companies ASML and ASMi fell on no fundamental newsflow. In contrast, ASML posted strong Q4 numbers and guided towards 20% sales growth in 2022 as the company continues to see strong demand driven by digital trends in a diverse range of end markets. Payment company Adyen – one of the portfolio’s higher multiple stocks – also declined.
On the positive side, positions in National Bank of Greece and Polish Pekao Bank were amongst the top performers on the back of strong performance in the sector. Russian Lukoil also benefited performance as the oil price remained strong.
The Company’s position in LVMH outperformed the falling market after reporting stellar results. The luxury group delivered exceptional numbers for both Q4 and full year 2021 with positive sentiment across almost all divisions and regions. The turnaround of the acquired Tiffany brand continues to be on track and sales in China accelerated despite continued local lockdowns.
Our travel exposure through Amadeus was positive as concerns over the Omicron variant continued to fade and therefore the outlook for travel coming back in 2022 continued to brighten.
We have not dramatically changed the portfolio during the month as we have not seen any material change to industry and company fundamentals. Having attended two large conferences and spoken to many of our companies since the start of the year, there have been little to no signs of weakness that could have caused us to take action.
At the end of the period the Company had a higher allocation than the reference index towards technology, industrials, consumer discretionary, health care and energy.
The Company had an underweight allocation to financials, consumer staples, utilities, telecoms, real estate and basic materials.
While we believe the environment remains supportive for corporate profits overall, there is potential for a slowdown as growth begins to normalise during the latter half of the year. Meanwhile the operating environment for companies continues to be complicated by supply chain and labour market disruption. In addition, we expect some of the strong cyclical tailwinds and indeed policy support seen in 2021, to fade over the course of 2022. Whilst rate markets and inflation expectations are likely to stay volatile, we do not expect policy in Europe to change meaningfully.
We continue to stay close to our companies which allows us to understand the environment they are operating in. We expect greater dispersion between sector and stock outcomes and with that a need for greater selectivity. In our view this will favour well-managed, well-organised businesses with an element of pricing power, and we believe that holding these businesses will benefit our shareholders over the medium to long term.
21 February 2022
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