Blackrock Greater Europe Investment Trust plc (LON:BRGE) has announced its portfolio update.
All information is at 31 March 2021 and unaudited.
To discover more about the BlackRock Greater Europe Investment Trust click here.
Performance at month end with net income reinvested
| One Month | Three Months | One Year | Three Years | Launch (20 Sep 04) | |
| Net asset value (undiluted) | 3.5% | 1.6% | 54.7% | 68.3% | 620.8% |
| Net asset value* (diluted) | 3.4% | 1.5% | 54.6% | 68.1% | 620.7% |
| Share price | 1.9% | 1.1% | 70.0% | 76.9% | 626.7% |
| FTSE World Europe ex UK | 4.4% | 2.4% | 34.9% | 27.3% | 318.0% |
* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 536.45p |
| Net asset value (including income): | 537.35p |
| Net asset value (capital only)1: | 536.35p |
| Net asset value (including income)1: | 537.06p |
| Share price: | 536.00p |
| Discount to NAV (including income): | 0.3% |
| Discount to NAV (including income)1: | 0.3% |
| Net gearing: | 5.9% |
| Net yield2: | 1.1% |
| Total assets (including income): | £464.2m |
| Ordinary shares in issue3: | 86,383,101 |
| Ongoing charges4: | 1.0% |
1 Diluted for treasury shares.
2 Based on an interim dividend of 1.75p per share and a final dividend of 4.40p per share for the year ended 31 August 2020.
3 Excluding 23,945,837 shares held in treasury.
4 Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2020.
| Sector Analysis | Total Assets (%) | Country Analysis | Total Assets (%) |
| Technology | 26 | Denmark | 19 |
| Industrials | 25.3 | Switzerland | 17.5 |
| Health Care | 14.3 | Netherlands | 16.4 |
| Consumer Services | 12 | France | 14 |
| Consumer Goods | 9.9 | Sweden | 6.8 |
| Financials | 4.9 | Russia | 5.2 |
| Basic Materials | 4.1 | Italy | 5 |
| Oil & Gas | 3.9 | Germany | 4 |
| Net Current Liabilities | -0.4 | United Kingdom | 3.4 |
| —– | Poland | 2 | |
| 100 | Finland | 1.9 | |
| ===== | Ireland | 1.8 | |
| Spain | 1.8 | ||
| Israel | 1.3 | ||
| Greece | 0.3 | ||
| Net Current Liabilities | -0.4 | ||
| —– | |||
| 100 | |||
| ===== |
| Top 10 holdings | Country | Fund% |
| ASML | Netherlands | 7.9 |
| Sika | Switzerland | 5.6 |
| Kering | France | 5.4 |
| DSV | Denmark | 4.9 |
| Novo Nordisk | Denmark | 4.2 |
| Lonza Group | Switzerland | 4.2 |
| Royal Unibrew | Denmark | 4.1 |
| Safran | France | 3.5 |
| RELX | United Kingdom | 3.4 |
| Hexagon | Sweden | 3.4 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV rose by 3.5% and the share price by 1.9%. For reference, the FTSE World Europe ex UK Index returned 4.4% during the period.
Europe ex UK markets rose during March. The global economy continues to improve rapidly, particularly in the US as the vaccination rollout is well ahead which is reflected positively in commentary from a number of European companies. Consumer data also remains robust with strong household balance sheets leading to heightened demand for consumer goods.
Higher growth stocks lagged during the month while classic ‘reflation plays’ such as autos performed well. Overall, all sectors rose higher during March with the telecoms, consumer goods and materials leading the market rally, while health care and oil & gas were behind.
Despite European re-opening strategies remaining patchy and local lockdowns continuing, we remain in a positive macro recovery environment overall. Our overall portfolio positioning has not changed as we continue to run a portfolio reflecting our constructive view of the world and we expect a positive Q1 reporting season for many of our companies.
The Company slightly underperformed the reference index, driven by weak stock selection within health care and an underweight to European autos. Sector allocation was positive while stock selection detracted.
In sector terms, the Company’s lower allocation to consumer goods, particularly autos, and telecoms was negative for returns. A lower allocation to financials and an overweight to industrials aided returns.
The health care sector was the largest detractor to returns as more defensive quality assets sold off over the month. Lonza and DiaSorin both weighed on returns. There was no major stock specific news, but it is likely that these stocks were used as funding sources as the market rotated into lower quality names. Our confidence in their nearer term outlook was bolstered by favourable readacross from peers raising guidance and giving positive profit warnings.
Within the same sector, Novo Nordisk was also a modest detractor, caused by concerns about insulin pricing in China, as well as some negative sentiment surrounding the likely delay of Food and Drug Administration approval for a high dose version of one of its diabetes drugs. Our position in renewable diesel company Neste Oil detracted as renewables continue to experience volatility and Neste saw small downgrades on weakness in the oil refining market.
Elsewhere, not owning car manufacturers such as Volkswagen detracted from returns. The sector performed well as ambitious corporate strategy updates suggested the electric vehicle (EV) overhang for European auto companies will not be as negative as previously expected by the market. While monitoring developments closely, we remain cautious for now as, at this stage, we are not convinced European manufacturers are in a position to gain significant market share and in the long term we expect EVs to be less profitable than traditional combustion engine vehicles.
On the positive side, the Company benefited from our exposure to the semiconductor sector as end markets including the auto sector and smart phones continue to accelerate, which has led to a global chip shortage. ASML was amongst the best performers as Intel, one of their biggest customers, announced increased investment plans in the US. As the sole maker of EUV lithography machines which are key to produce leading-edge semiconductors, ASML is highly likely to see a significant expansion in its order book for EUV tools. BE Semi, a manufacturer of assembly equipment for the semi industry, and Netcompany also performed strongly.
Luxury group Kering was the top performer over the month after a potential merger with Richemont was rejected. Importantly, the Company remains positive on the APAC region, seeing strong trends in China while their key brand, Gucci, is also well-positioned to benefit from stimulus payments in the US.
Both Sika and IMCD contributed positively. Sika announced an acquisition of a Brazilian mortar manufacturer which will help to provide access to builders merchants in the region, aiding cross-selling opportunities. Shares in IMCD continued to perform well in March following strong results in February. Last year’s pandemic driven crisis was an accelerator for the company as larger players looked to cut costs by using IMCD in place of inhouse distribution. We see significant opportunities for them to build out their specialty chemicals network in the US over the coming years.
At the end of the period the Company had a higher allocation than the reference index towards technology, consumer discretionary and industrials and was neutral health care. The Company had an underweight allocation to financials, utilities, consumer staples, telecoms, basic materials and energy.
Outlook
We see recent market strength persisting over the coming months, aided by better virus testing capabilities, a successful vaccine rollout and a resilient global consumer, alongside continued accommodative fiscal and monetary policy. This market recovery is unlikely to be equal across all sectors: some companies still lack pricing power and are unable to reinstate dividends; others, however, such as travel exposed stocks, could see a meaningfully brighter 2021. Inflation may be on the horizon, but rates will likely remain low. A period of prolonged negative real rates and higher nominal growth is needed to allow governments globally to work their way out of the post pandemic debt overhang. We see this as being a supportive backdrop for equities overall.
To discover more about the BlackRock Greater Europe Investment Trust click here.
