“Europe looks more like emerging markets than it does North America,” Joe Faraday, Baillie Gifford’s new head of European equities, suggests in this conversation. He means that growth takes many forms across the continent, creating an eclectic mix of companies to choose from and specific circumstances to consider. As he reveals, it’s led him to reposition the portfolios under his watch, broadening the types of companies they contain.
Background:
Joe Faraday is our head of European equities and investment manager of the Baillie Gifford European Growth Trust and European Fund.
In this conversation, he tells Short Briefings… host Leo Kelion about some of the stocks he has added to and removed from the portfolios of our European Growth Strategy. Faraday took charge earlier this year with a mandate to improve performance.
“We’ve changed rather a lot,” he says, regarding efforts to broaden the mix of growth themes the portfolios he manages tap into, while ensuring that he grounds each buy or sell decision on an intimate understanding of each stock.
Companies discussed include:
- Piraeus Bank – Greece’s biggest lender, expanding its reach with new insurance, asset management and digital banking services
- LPP – the Polish retail group behind Sinsay, the rapidly growing fashion and homeware brand big in central and eastern Europe
- TotalEnergies – the French energy group involved in exploration and production, liquefied natural gas and renewables
- Rheinmetall – the German defence contractor, whose activities range from drones and armoured vehicles to ammunition and satellites
- Bending Spoons – the Italian app acquirer that rearchitects and revitalises mature digital businesses
- Rational – the German manufacturer of ‘combi ovens’ designed for commercial kitchens
Resources:
A disciplined case for European Growth
European megatrends: what’s on my mind?
Supercommunicators by Charles Duhigg
The European opportunity set
The Short Briefings… archive
Companies mentioned include:
· Airbus
· Allegro
· Bending Spoons
· CaixaBank
· Dino Polska
· Exail
· Iberdrola
· Piraeus Bank
· LPP
· LVMH
· Nexans
· Rational
· Rheinmetall
· TEKEVER
· TotalEnergies
Timecodes:
00:00 Introduction
01:50 From paint-making to portfolio management
03:30 Investment track record
05:25 Broadening the growth types
07:05 Megatrends and individual circumstances
08:45 Rearmament, energy security and consumption
10:30 “Europe’s not like Marmite”
11:45 TotalEnergies – a mega energy business
16:30 Rheinmetall – a catch-all defence contractor
19:05 LPP – the Zara of eastern Europe
22:20 Piraeus Bank pushes into insurance
24:40 LVMH and the outlook for luxury
26:40 Building on Bending Spoons
28:50 “Decisive action has been taken”
29:35 Book choice
Glossary of terms (in order of mention):
Small-cap: Shares in companies with relatively small total stock market values.
Compound: Gains that build on earlier gains, so an investment’s value can grow at an increasing rate over time.
Exploration and production: The part of the oil and gas industry that searches for reserves and extracts them.
Liquefied natural gas (LNG): Natural gas cooled into liquid form so it can be stored and transported more easily.
Integrated power: A business that combines several parts of the electricity system, such as generation, trading and supply, often across conventional and renewable sources.
Capital allocation: The decisions a company makes about how to use its money, including investing in operations, buying businesses, repaying debt or returning cash to shareholders.
Free cash flow: Cash left after a company has paid its operating costs and the investment needed to maintain or expand the business.
Capital markets day: An event where a listed company gives investors and analysts detailed information about its strategy, operations and financial prospects.
International Monetary Fund (IMF): An international institution that monitors economies, advises governments and can lend to countries facing financial difficulty.
Flotation: The process by which a private company lists its shares on a public stock market, often through an initial public offering (IPO).
