The information contained in this release was correct as at 31 March 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 March 2022 and unaudited.
Performance at month end with net income reinvested
(20 Sep 04)
|Net asset value (Undiluted)||2.2%||-19.3%||3.6%||59.8%||647.0%|
|FTSE World Europe ex UK||2.1%||-7.1%||6.5%||32.2%||345.3%|
Sources: BlackRock and Datastream
At month end
|Net asset value (capital only):||550.06p|
|Net asset value (including income):||551.66p|
|Premium to NAV (including income):||0.8%|
|Total assets (including income):||£564.4m|
|Ordinary shares in issue2:||102,300,411|
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 15,628,527 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||7.2|
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV rose by 2.2% and the share price by 3.3%. For reference, the FTSE World Europe ex UK Index returned 2.1% during the period.
With March being another volatile month, markets closed out an extremely tumultuous quarter. Europe ex UK markets took a dive at the beginning of the month which was quickly followed by a sharp rally on hopes for diplomatic progress between Russia and Ukraine. At the end of March, the FTSE Europe ex UK Index finished the month slightly up.
The region saw another big inflation print during the month, although it is important to highlight that increased energy prices are a key factor, whilst Eurozone core inflation remained at 3%.
More defensive sectors such as health care and telecoms delivered the strongest performance during March. The energy sector was also up as prices continued to push higher from already elevated levels. Utilities and the consumer sectors delivered the weakest performance over the period.
The Company slightly outperformed its reference index during the month, largely driven by strong sector allocation while stock selection was negative. In sector terms, our zero exposure to utilities was positive, as the sector fell as EU leaders met to discuss taxing windfall energy profits in an effort to protect consumers.
A higher exposure to industrials was helpful as some assets recovered following sharp sell-offs earlier in the year. A higher allocation to health care also aided returns.
The Company’s overweight to the consumer sectors detracted, as consumer cyclicals came under pressure reflecting increased risks of weaker consumer spending due to higher energy and food prices. However, this was significantly offset by strong stock selection, as the Company is largely exposed to the high-end consumer who should be less challenged by higher prices. Our positions in Hermès and Lindt, for example, were amongst the top performers.
The technology sector was the largest contributor to relative returns during the month. In particular, a holding in ASM International was beneficial for performance. Whilst there was no stock specific news, we saw a rebound in a number of good quality, medium sized companies that execute well which had been overly hurt in the rotation at the beginning of the year. Elsewhere in the sector, Swedish listed Hexagon was also amongst the best performers.
Many of our higher quality, resilient businesses within industrials, which are expected to trade relatively better than more cyclical stocks during volatile times, were also amongst the best performers. IMCD and DSV rebounded following weakness at the beginning of the year, as they have the potential to cope better with higher commodity prices. DSV, for example, had been under pressure as the market expects a normalisation in air freight rates as capacity picks up coming out of a Covid-19 constrained world. However, this has yet to materialise with both air freight and shipping yields remaining high. The company also has a successful M&A track record which is another lever that could be used to help fill any gaps as freight rates normalise.
Similarly, shares in Epiroc bounced as attention shifted to higher commodity prices as a positive for earnings and the structural trends supporting this business - such as electrification and automation of mines - outweighing short-term concerns over mid to high single digit revenue exposure to Russia from their aftermarket and servicing business.
Novo Nordisk was the single largest contributor to performance having held a Capital Markets Day in March in which, amongst other things, they gave further detail on the strong growth opportunities for their obesity drug Wegovy. The Company’s positions in Lonza, Chemometec and DiaSorin also enjoyed support from strength in the health care sector.
Negative performance came primarily from the Company’s Russian stocks which were valued at close to nil by BlackRock at the beginning of March and hence impacted returns during the month.
Royal Unibrew also detracted after disappointing the market on full year numbers. The company reported margins circa 1% weaker than the market had expected, driven by higher input costs and marketing spend. Their guidance on operating profits was also lower than the market had expected, again driven by higher raw material costs. However, the top line performance was strong, driven by higher volumes, and the report showed the company continuing to increase its economic power with several brands strongly increasing market share.
Finally, not holding defensive large-cap names including Roche, Bayer and Novartis was also negative for relative performance.
At the end of the period the Company had a higher allocation than the reference index towards technology, industrials, consumer discretionary and health care. The Company had an underweight allocation to financials, energy, utilities, consumer staples, telecoms, real estate and basic materials.
After an exceptional 2021 for European markets, the first quarter of 2022 has been challenging, with concerns over the economic implications of the Russia invasion of Ukraine, rising interest rates and continued supply chain disruptions weighing on equity returns.
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 disruptions. 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.
25 April 2022
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