Swiss smaller companies: Several unfairly neglected gems

Source photo: GS Swiss PCB

September saw large cap stocks regaining some ground as the bluechip SMI index advanced 1.4% during the month, outperforming the SPI Extra Index, which fell 2.4%.

The current market environment continues to be characterised by an outperforming pharmaceutical sector and the market’s negative sentiment towards industrial stocks has persisted, though September saw a slight recovery in European “value” investment indices that was largely driven by a rising oil price and a consequent recovery in the energy sector.

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Value investing in Swiss small and mid-sized companies

Photo: Alps

Can you explain the strategy? What sets you apart from other managers in this space?

At QUAERO CAPITAL we believe that the best returns are often to be found in the companies that are the least well-followed. In spite of the fact that there are only 247 shares quoted on the SIX exchange, there are over 60 companies where there is no research coverage. Many of these companies are small and liquidity problems can deter larger fund managers. QUAERO CAPITAL can use its size to our advantage and invest in companies where others cannot.

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New investments in Swiss smaller companies

Photo: Pilatus Aircraft

Following company visits and new attractive prices, we have invested in three Swiss stocks for our European Small Companies strategy: Composite materials specialist Gurit, private bank EFG International and high precision machining company Tornos. With a total of 69 holdings, we will now be pruning smaller positions in coming months.

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As Greece tackles its structural challenges, value investors return

Photo: Pixabay

Value investors are returning to Greece, hopeful that if improving macro economic conditions persist, the coming year will prove a major boost to Greek small cap stocks.

Uncertainties certainly persist: the government has still to agree a post-bailout strategy with the Troika of lenders (made up of the International Monetary Fund, The European Commission and the European Central Bank). There is an estimated EUR 1 billion shortfall in Greece’s proposed 2018 privatisation programme (which may impact personal tax and VAT measures), and an election cycle is set to begin soon.

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Strong Euro supports European markets, but concerns for further currency gains

QUAERO CAPITAL - European Smaller Companies
Image source: SMA Solar

After a strong start in the first quarter of the year, European stock markets have been consolidating but the core holdings of our Smaller European Companies strategy continue to benefit from economic growth across the region. Small cap stocks have coped with the strengthening Euro but further gains may start to have a negative impact on the competitive position of European exporting companies. The EUR106 million strategy, launched in 2007, is invested in 63 listed, partially family-owned European Smaller Companies.

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Recovery in Southern Europe and strong performance from manufacturing exporters support smaller companies

European Smaller Companies - Bauer
Image: Bauer

Recovery in southern Europe’s markets and stronger performance by manufacturing exporters have provided good support to value-driven European smaller companies strategies in recent months. Corporate confidence indicators have continued to improve across Europe as the fears of political risk have given way to the resurgence of the political mainstream, supporting manufacturing exporters which are more sensitive to the economic environment.

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European equity markets power ahead, especially smaller companies

The first quarter of the year continued strong for equity markets, with the MSCI World index gaining 5.9% and Asia also up 13.4%, but the best performance came from Europe, where markets overtook the US, ending the quarter with a rise of 6.7%. By strategy, Value again lagged Growth by over three percentage points, but strong dynamics helped European smaller companies outperform larger companies by nearly three percentage points. Within Europe, the previous trend was reversed, with a subdued performance from Northern Europe and a strong rally from Southern Europe: Italy was up 8.4%, Spain up 9.5% and Portugal up 7.7%. After a solid end to 2016, growth is gathering pace in 2017.
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Europe’s smaller, family owned enterprises outshine blue chips

Family Enterprise - Thin Solar FIlm
Photo: Manz AG

Markets have been consolidating after the sharp rally since the surprise USA election results last November. With a 1.1% rise in the Euromoney index, smaller companies fared better than blue chips where the Stoxx 600 Europe index fell by 0.4%. Business trends were firmer at the end of last year and there seems to be a fair level of confidence in the outlook for this year, according to Quaero Capital’s Smaller Companies strategy managers Marc Saint John Webb and Philip Best.Read more