‘Ryanair nose­dived – but I’ve bought more shares’

The Daily Telegraph - Your Money - - FRONT PAGE -

Pro­fes­sional in­vestors are tip­ping the Con­ti­nent as one of the bright spots for 2018 as the eu­ro­zone puts its prob­lems be­hind it and out­shines Britain and Amer­ica. Tele­graph Money last spoke to Rory Powe, man­ager of the top per­form­ing £1.2bn Man GLG Con­ti­nen­tal Euro­pean Growth fund, be­fore the EU ref­er­en­dum. Here he ex­plains how Brexit has made Europe stronger and why he’s buy­ing more Ryanair shares, names the tech stock that’s tre­bled in value in less than two years. where it looks like some coun­tries might fall out of the eu­ro­zone. It has had very lit­tle im­pact or in­flu­ence on our ac­tiv­ity. About 70pc of the port­fo­lio is in global com­pa­nies, where the UK is a rel­a­tively small mar­ket. Where com­pa­nies are more ex­posed to Britain they’ve ei­ther got nat­u­ral hedges to the pound or they’ve been able to raise prices. The de­ci­sion to leave ac­tu­ally gal­vanised the EU and, para­dox­i­cally, made it less likely that other coun­tries would crash out.

We ap­ply an un­com­pro­mis­ing ap­proach to in­vest­ing in com­pa­nies with for­mi­da­ble com­pet­i­tive ad­van­tages – firms with the stay­ing power to thrive in most eco­nomic cir­cum­stances. The for­tunes of these com­pa­nies do not rely on a strong Euro­pean econ­omy. About three quar­ters of the firms in the port­fo­lio are val­ued at more than $5bn (£3.7bn).

When I took over the fund [in 2014] it had more than 200 po­si­tions and I cut them to around 30 names. There’s an in­tel­lec­tual bot­tle­neck: at more than 40 it be­comes dif­fi­cult for me to re­ally un­der­stand each com­pany.

Top fund man­ager Rory Powe tells Sam Brod­beck why Euro­pean stocks are set to soar in 2018

Fi­nan­cials are un­der-rep­re­sented. Too many firms are re­liant on the un­der­ly­ing economies and their mar­gins rely too heav­ily on in­ter­est rates. I want to avoid firms on the con­sumer front line as much as pos­si­ble, as that’s where price com­pres­sion is most ev­i­dent. Un­em­ploy­ment is still high and con­sumers are bet­ter equipped with price and qual­ity trans­parency than ever be­fore. That means they have the power and be­ing on the front line is one of the most hos­tile places to be. That’s where Ama­zon is eat­ing many lunches. The Swiss firm VAT has con­trib­uted the most to the fund. It makes vac­uum valves for semi­con­duc­tors. To­day’s mar­ket is about “minia­tur­i­sa­tion” and that’s driven by de­mand from things such as mo­bile phones. VAT is the mar­ket leader, about eight times big­ger than its near­est ri­val. We bought when it floated in March 2016 at be­low 50 Swiss francs (£38); it’s now roughly tripled to about 150.

Last year, Cri­teo, an ecom­merce mar­ket­ing com­pany, was a very costly mis­take. We in­vested in De­cem­ber 2016 and the share price has fallen by 40pc since then. I in­vested be­cause it’s the leader in “re­tar­get­ing”, an area of dig­i­tal mar­ket­ing. But Ap­ple made changes that mean about a fifth of Cri­teo’s rev­enue is likely to dis­ap­pear.

The les­son here is that when you’re up against a gi­ant like Ap­ple it can move the goal­posts and up­end the busi­ness model. This is the prob­lem with tech­nol­ogy, it’s so fast mov­ing. I’ve ag­gres­sively re­duced our po­si­tion.

Yes, and my fam­ily’s. Over half of my wealth is in three funds across GLG. Founded by French moun­taineers in the Fifties, Mon­cler, the lux­ury goods com­pany, is a prime ex­am­ple of a busi­ness with a con­sumer base not threat­ened by Ama­zon.

The brand was bought by [Ital­ian bil­lion­aire] Remo Ruffini in 2003 and com­pletely re­ju­ve­nated. Rev­enues were less than €100m (£88.5m) then, and now ex­ceed €1bn.

It floated in 2013 and is in ro­bust health, both in terms of the qual­ity and the de­sign of its prod­ucts. The com­pany is ex­tremely fas­tid­i­ous about the qual­ity of its prod­uct, in­clud­ing things like the stitch, zips and duck down.

Its cus­tomers are high-end: jack­ets can sell for more than £1,000. More than 70pc of rev­enues come from out­er­wear that can be worn on and off the slopes. It has very suc­cess­fully moved into apres ski, knitwear and

www.tele­graph.co.uk/funds

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