European Assets Trust: European Small-Cap Specialist
Edison | Jul 10, 2017 04:36AM ET
European Assets Trust NV (AS:EURT) aims to achieve long-term capital growth through investment in small and medium-cap companies in Europe (ex-UK). The investment approach is fundamental and bottom-up; EAT has a solid long-term track record and a high distribution policy underpins an attractive 5.2% yield. 2016 was a challenging year for EAT and NAV total return underperformed the index by 15.9pp. Since then, the performance has stabilised and the shares have returned to a modest premium to NAV (including income). The manager, Sam Cosh, is confident of the trust’s investment philosophy and process and is positive on the economic outlook.
Investment strategy: Bottom-up and patient
The manager’s aim is to build a relatively concentrated portfolio of around 40-60 stocks across diverse sectors. The approach is fundamental and bottom-up, involving meetings with company managements and producing proprietary research on candidate stocks. Portfolio construction is unconstrained by benchmark sector and country weights, purely reflecting stock selection, which favours companies with quality management and franchises, and strong cash flow generation. Valuation discipline is of particular importance and attractive companies that do not meet EAT’s valuation criteria are placed on a ‘patient fisherman’ list, awaiting a more attractive purchase price.
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