Jupiter European Opportunities published its interim results on 4 February. Over the six months to the end of November 2015, the total return on net assets was 3.1%, well ahead of the -4.7% returned posted by the FTSE World Europe ex UK index. Demand for the company’s shares (£35m worth of new shares were issued in the period) pushed its rating higher (from a 0.9% premium to a 3.9% premium) giving shareholders a return of 6.2%.
Alexander Darwall, the investment manager, came off the Board on 4 February but stays on as the portfolio manager “for the foreseeable future”.
Alexander’s manager’s report says the “modest” outperformance of the Company’s assets is partly due to the sector exposures: underweight in the financial and oil and gas sectors, which underperformed; overweight in consumer sectors which outperformed. The macro data show stronger growth in consumer spending (for example airline travel) whereas capital expenditure in Europe remains lacklustre.
The two biggest contributors to positive performance were Provident Financial and Grenkeleasing. Both are financial companies; both have produced excellent results just as the mainstream banks have disappointed. Royal Caribbean and Marine Harvest shares performed well. The former is benefitting from good demand for cruising which has led to better prices. The new and important factor is the new demand for cruising emanating in China. Marine Harvest, the world’s largest salmon farmer, has enjoyed significantly higher prices as demand for salmon continues to increase.
Of the other holdings he notes the continuing good performance of Ryanair. Like all the airlines, Ryanair has benefitted from lower oil prices. Newer, more efficient aeroplanes and lower fuel prices have stimulated considerable new demand for air travel.
The biggest single negative contributor was Syngenta following the rejection of a takeover approach from their rival, Monsanto; the CEO has since resigned; demand for their key products in crop protection is ‘soft’; and the strategy is being reviewed. Yet they retain this holding as the company should be able to monetise its good quality assets in due course. Amadeus was another significant under-performer. Although results have been satisfactory there is a potential threat to their business from customers trying to reduce fees. They will retain this holding until and unless these threats materialise.
Other poor performers include Leonteq and DNB. These two companies, like the best two performers, are financials companies. The differing outcomes within the same sector illustrates the point that specific company fundamentals are more important than general or thematic investment. Leonteq is a young company providing structured products to banks and insurance companies. The share price has wobbled as the growth rate has moderated. However, he believes that the company has strong attributes and retains this holding. DNB, the leading Norwegian bank, is affected to a certain extent by the lower price of oil and by changes in regulations. These developments have highlighted the shortcomings in the investment case.
JEO : Further outperformance from Jupiter European Opportunities