In its first set of results since the merger of Henderson European Focus with Hendedrson Eurotrust, Henderson European has published figures covering the 12 month period ended 30 September 2024. Over the period, the NAV return was 16.6%, ahead of its index benchmark (FTSE World Europe ex UK) by 1.3%. The share price total return was 20.5%. The average European trust returned 15.4% and the average open-ended fund (IA OEIC Europe ex-UK sector) returned 14.6%.
The dividend is being maintained at 4.35p.
The discount narrowed to 9.1% from 11.9% over the period (averaging 10.9%. However, the discount has since widened towards the wider end of the trust’s 12-month range. 2,376,191 shares were bought back during the financial year, to be held in treasury (representing 0.7% of share capital). Since the year end (and as at 9 December 2024) a further 5,780,287 shares have been bought back (representing 1.6% of share capital), partly in response to increased selling pressure driven by investors’ concerns around changes to capital gains tax ahead of the UK budget at the end of October.
Extracts from the managers’ report
[The managers give no detailed breakdown of the individual stocks that drove returns, but I thought the following was interesting:]
Fundamental active investors now account for only 10-20% of daily traded volumes in the European equity market. As such, we are minority participants in a market which is dominated by passive funds and hedge funds with very short-term strategies. Neither of these are equipped to take the long-term view, to take the other side of the trade when panic sets in. The result is outsized reactions to economic, market or company news that are not reflective of long-term prospects or value. Conversely though, that means there is opportunity for those of us with the ability – the luxury – to express a long-term view. Our summer purchase of Ryanair is a case in point. We bought shares on the days when the numbers of sellers vastly outweighed the buyers.
We also believe that this is the lens through which we should view the changeable fortunes of technology shares over the summer. For example, shares in ASML – a major player in the AI supply chain and one of Europe’s largest companies – suddenly declined by 30%. This was despite so-called ‘hyperscalers’, the technology giants like Microsoft and Alphabet ploughing billions into AI, indicating that they are planning to maintain or even grow their expenditure on the technology.
As such, a narrative emerged explaining that the sell-off stemmed from concern over a lack of return on investment for the hyperscalers. Our simple view is: it is too early to tell what the return will be, but either way we do not expect them to stop investing. That alone is sufficient to ensure plentiful revenues flow to the supply chain, such as our investments across semiconductor capital equipment, building materials and industrial equipment (which collectively add up to over 15% of the Company’s NAV). As for that summer sell-off, it reaffirmed the ‘blunt tool’ that is the short-termism of a majority of participants in the market.
HET : Henderson European successfully navigates tricky markets
