Blackrock Greater Europe Investment Trust plc (LON:BRGE) has announced its latest portfolio update.
All information is at 31 August 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) | 4.1% | 14.1% | 49.1% | 85.5% | 812.9% |
| Net asset value* (diluted) | 4.1% | 14.1% | 49.1% | 85.4% | 813.4% |
| Share price | 4.2% | 13.8% | 56.8% | 99.6% | 841.0% |
| FTSE World Europe ex UK | 2.8% | 6.4% | 27.4% | 34.5% | 372.9% |
* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 676.41p |
| Net asset value (including income): | 678.52p |
| Net asset value (capital only)1: | 676.41p |
| Net asset value (including income)1: | 678.52p |
| Share price: | 692.00p |
| Premium to NAV (including income): | 2.0% |
| Premium to NAV (including income)1: | 2.0% |
| Net gearing: | 4.8% |
| Net yield2: | 0.9% |
| Total assets (including income): | £651.8m |
| Ordinary shares in issue3: | 96,055,411 |
| Ongoing charges4: | 1.0% |
1 Diluted for treasury shares.
2 Based on a final dividend of 4.40p per share for the year ended 31 August 2020 and an interim dividend of 1.75p per share for the year ending 31 August 2021.
3 Excluding 17,573,527 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 | 24.4 | Switzerland | 21 |
| Industrials | 23.3 | Netherlands | 18.3 |
| Health Care | 16.6 | Denmark | 17.5 |
| Consumer Discretionary | 15.7 | France | 11.5 |
| Financials | 8.2 | Sweden | 7.4 |
| Consumer Staples | 4.6 | United Kingdom | 5.4 |
| Basic Materials | 4 | Italy | 4.7 |
| Energy | 3.7 | Russia | 4 |
| Net Current Liabilities | -0.5 | Finland | 2.2 |
| —– | Poland | 2.1 | |
| 100 | Spain | 1.8 | |
| ===== | Ireland | 1.7 | |
| Israel | 1.1 | ||
| Greece | 1 | ||
| Germany | 0.8 | ||
| Net Current Liabilities | (-0.5) | ||
| —– | |||
| 100 | |||
| —– |
| Top 10 holdings | Country | Fund % |
| ASML | Netherlands | 7.8 |
| Lonza Group | Switzerland | 5.8 |
| Sika | Switzerland | 5.1 |
| Kering | France | 4.8 |
| DSV | Denmark | 4.6 |
| Novo Nordisk | Denmark | 4.5 |
| RELX | United Kingdom | 4.0 |
| Royal Unibrew | Denmark | 3.6 |
| Netcompany Group | Denmark | 3.3 |
| Hexagon | Sweden | 3.2 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV rose by 4.1% and the share price increased by 4.2%. For reference, the FTSE World Europe ex UK Index returned 2.8% during the period.
Europe ex UK markets continued to rise during August. Technology, utilities and health care led the market while the consumer sectors were behind.
In what typically makes for a quiet month, this August was characterised by buoyant markets. While most of our favoured companies continued to make gains following a strong earnings season, optimism around the ongoing economic recovery was slightly dampened, driven both by worries about the rapidly spreading Delta variant, as well as the rising threat of Chinese regulation.
The Company outperformed its reference index, driven by both stock selection and sector allocation. In sector terms, the Company’s higher allocation to technology and industrials aided returns, as did a lower allocation to consumer goods. However, a higher allocation to consumer services and an underweight to utilities and financials detracted. The latter was more than offset by strong stock selection, particularly a holding in Polish Bank Pekao which contributed to performance.
The health care sector was the strongest contributor to relative performance. Lonza was the top performer over the month after beating consensus estimates in the first half of the year, while also upgrading forward guidance. We remain particularly encouraged by both the margin progression demonstrated, as well as management’s decision to reinvest proceeds from the sale of Lonza’s specialty ingredients division back into its core business at highly attractive returns. Novo Nordisk also contributed strongly, still enjoying momentum from robust Q2 figures and the approval of its obesity drug. Elsewhere in the sector, DiaSorin was amongst the best performers.
ASML and VAT Group, once again outperformed on the back of continued tightness in the semiconductor market. ASML’s order backlog reached a record level of EUR 17.5bn, and with visibility on some tools now stretching as far out as the middle of the decade, we remain confident in the outlook for this business.
The Company’s positioning within basic materials and industrials also aided returns. A position in chemicals distributor IMCD was amongst the best performers over the month following very strong results. Operating EBITA increased by 46% in the first half of the year, highlighting that its growth strategy remains on track. Within industrials, payment company Adyen and logistics name DSV performed strongly.
Negative performance mainly came from luxury names such as Kering and Hermes which underperformed as markets reacted to the comments made by the Chinese leadership regarding excessive consumption and a plan for wealth redistribution. While our real-time alternative data sources show general activity levels down in the country following several COVID-related lockdowns and heavy summer flooding, we cannot yet see any incremental fall in demand for luxury goods. However, we believe there could be a period of uncertainty and hesitation in China following these comments, and so while we continue to like these companies on a long-term view, we have slightly reduced our exposure. In this context, not owning LVMH and Richemont was positive for returns.
Our position in travel IT platform Amadeus fell as markets digested news flow pertaining to the continued spread of the Delta variant. This includes some areas in the US experiencing a particularly high hospitalisation rate, alongside data from studies conducted in Israel which suggests that vaccine efficacy rapidly falls after six to seven months, highlighting the need for ‘booster’ shots. As a result, the recovery of international travel has once again been shifted to the right.
Shares in Logitech also struggled during the month as video conference growth figures were slightly weaker than expected. Company management attributed this to slower trends in EMEA but remains confident with their 10-25% full year growth guidance. Gaming remained strong and Logitech continued to take market share.
At the end of the period the Company had a higher allocation than the reference index towards technology, industrials, consumer discretionary, health care and energy. The Company had an underweight allocation to financials, consumer staples, utilities, telecoms, real estate and basic materials.
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 2022. Inflation may be on the horizon, but interest 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.
