When you invest all around the world, you want to have a global perspective. That's more difficult than it seems – we are all bound up in the assumptions that surround us in our news and in the information we receive every day. We should always question the assumptions that the market is making so we can take the opportunity of buying into investments that are mispriced.
Often the market, and financial accepted wisdom will have a view on an asset class or region that we think goes too far one way or the other. We have been steadfast in our view that Europe is one such situation – a political discussion over the status of the UK in Europe has been played out in public to such an extent that the hyperbole of political discourse is hampering the ability of analysts to come to an objective conclusion about the fortunes of what is the world's largest trading block. Cutting to the chase, you tend to find that UK analysts and managers tend to be far more negative on the state of Europe than others around the world. Do they know more than experts elsewhere? Hardly. And to boldly claim that Europe is on the cusp of deflation and that the euro is fundamentally flawed is missing the point – these are absolute statements. Better to ask whether the Greek debt issue is spooking markets so much that it's possible to pick up some very good investments in countries like Germany and France at relatively knock-down prices? We think yes.
The negativity locally means that UK investors could be missing out on the recovery of a continent with almost 500 million citizens, a trade surplus, and which is home to the powerhouse that is Germany. But don't just take our word for it. The Financial Times reported recently how US investors have been piling into European funds, and making a good profit as the prospect for the region's companies improves, bolstered by the European Central Bank's quantitative easing programme. Not only that, they realise that the recovery in the US is more than priced into US shares, making them relatively expensive. We concur – there is still value in European companies, which are priced much cheaper than their US counterparts. It's a market where a selective manager can find very good opportunities.
This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.