BlackRock Greater Europe Investment Trust outperforms FTSE World Europe ex UK Index

BlackRock Greater Europe Investment Trust plc (LON:BRGE) has announced it latest portfolio update.

All information is at 30 November 2023 and unaudited.

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Performance at month end with net income reinvested 

At month end

1  Based on an interim dividend of 1.75p per share and a final dividend of 5.00p per share for the year ended 31 August 2023.

2  Excluding 17,116,777 shares held in treasury.
3  The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, write back of prior year expenses and certain non-recurring items for the year ended 31 August 2023.

Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing the Investment Manager noted:

During the month, the Company’s NAV rose by 11.1% and the share price was up by 12.5%. For reference, the FTSE World Europe ex UK Index returned 6.3% during the period.

November was an incredibly strong month for European ex UK markets. Economic data released in November showed a continued fall in inflation: Eurozone inflation dropped sharply to 2.4% from 2.9% in the previous month, which was the lowest annual inflation number since July 2021. Lower energy, food and services prices were the main drivers behind the improving inflation numbers. This led investors to gain confidence that central banks have likely reached the peak of their tightening cycles without causing significant damage to the economy. Hence, markets rallied from oversold levels after having lost ground from August to October.

The market was led by bond proxies such as real estate and risk assets including IT, industrials, financials and consumer discretionary. Energy, health care and consumer staples were the weakest performers in the market.

The Company outperformed its reference index during the month, driven by both positive sector allocation and stock selection. In sector terms, the portfolio’s overweight allocation to IT and industrials aided returns. A lower weight to commodities including energy and materials was also positive for relative returns. Our zero exposure to real estate detracted during the month.

Semiconductor names BESI, STMicroelectronics and ASML rallied through the month. Despite limited stock specific news, shares performed well given improving smartphone demand data and a better environment for risk assets in general. An update from American Nvidia also showed continued strong demand, particularly in data centre end markets.

Speciality chemical distributor IMCD was amongst the top contributors. The company guided to an improvement in end markets and IMCD specifically noted that they expected to see an increase in volumes in Q4 versus Q3.

Shares in Partners Group performed strongly over the month, benefiting from an improved rate environment and outlook for fundraising activity. We have spoken to the company’s CEO over the month, with management noting funding more readily available and an optimistic outlook for deal making.

Royal Unibrew was the worst performer during the period. The company reported weak Q3 results, with sales declining -1% versus expectations of 8% growth. This was driven by much weaker volumes than anticipated, which the company attributed to weather and price increases in Northern Europe in particular. The company also marginally lowered guidance for the rest of the year in part due to a lower contribution from the recently acquired Vrumona (soft drinks manufacturing) business, bringing the reliability of the management team’s execution into question. We are monitoring the developments closely as part of a reassessment of our investment thesis.

DSV also continued to underperform following the news of a CEO transition and the announcement of a logistics joint venture with Saudi’s NEOM city project, as we discussed in last month’s report. We would however note that management have done a decent job explaining the potential of the project and the protection mechanisms DSV have.

Outlook

The noise around market moves seems to increase with every passing year. We make no attempt to predict to the basis point next quarters’ GDP, inflation, or unemployment number. Nor do we pay much heed to top-down indicators or what they may reveal about the health of the global economy.  From our point of view, the world finds itself currently in the midst of several transitions: Covid to post Covid, inflation to disinflation, low interest rates to high interest rates.

These dynamics must be considered when assessing the health of the global economy and the prospects for equity markets. Various end markets may continue to imply weak demand as inventories are run down, while others – perhaps those associated with Chinese real estate – may have more prolonged problems. 

However, assessing the economy from the bottom-up, company by company, we see no reason for investors with a reasonable time horizon to be alarmed. Corporate balance sheets are strong after 15 years of deleveraging, margins remain at healthy levels and we may be at the foothills of an increase in capex spending resulting in a ‘modern era industrial revolution’. Similarly, household debt relative to assets is low in large economies, interest rate sensitivity is lower than in previous cycles and real wages are growing.

As investors we must be forward looking, we must anticipate areas of enduring demand and identify those special companies whose characteristics enable them to capitalise on this demand and, in doing so, benefit their stakeholders and shareholders. We remain optimistic about the prospects of companies held in our portfolio.

To discover more about the BlackRock Greater Europe Investment Trust click here