European Opportunities Trust - Initiation from QuotedData
2nd November 2023
'Special' growth companies
With its strong focus on growth, European Opportunities Trust (EOT) has faced significant headwinds during the last couple of years as, in the face of higher inflation and interest rates, investors have favoured more value and defensive exposures over growth stocks. Inflation now seems to be coming under control, but with growing signs of a recession in Europe, sentiment in financial markets is poor. Consequently, valuations of European equities are cheap relative to their history and global markets.
EOT's portfolio is made up of 'special' growth companies that typically benefit from strong intellectual property (IP), an advantageous industry structure, strong balance sheets, high recurring revenues, and multiple avenues for growth. These should be able to weather an economic downturn and outperform over the longer-term. If so, the current discount to net asset value (NAV) could offer a particularly attractive entry point, especially as EOT's board intends to provide shareholders with a 25% tender offer in 2026, assuming the continuation vote passes (as seems likely) at the upcoming annual general meeting (AGM).
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