Montanaro European Smaller Cos seeks to mine a history of 5.9% annual outperformance


#1

Originally published at: http://whichinvestmenttrust.com/montanaro-european-smaller-cos-seeks-to-mine-a-history-of-5-9-annual-outperformance/
With over 4,000 listed stocks, the European smaller companies universe is much larger than in the UK, and perhaps even more under researched, which creates opportunities for savvy managers to spot undervalued opportunities. Fast Facts Boutique asset manager Invests in small/medium sized companies only Probably the largest team focused on its sector in Europe Investment…


#2

They slip under the radar a little bit, I’d hard of them but never knew much about them.

When you look at the short term figures as I always do you’d just discount them but it sounds like there is a lot more to them than I expected.

I wonder if anyone else on here owns them?

the chart way down the bottom of the page on when historically it has been a good time to own them is really interesting.


#3

I love Game of Thrones, surely reason enough for me to consider investing in them :wink:

I’m with you @jonno they slipped under the radar with me. I like European Assets though, they’re small Euro companies too.

The chart at the bottom of the article, oh let me see if I can copy it here…

Hope that works ebcasue that is one very interesting chart me finks.


#4

Yes I agree, that chart looks compelling. Must confess I’ve not read the article yet, I was online when you posted this @citygirl and the system told me there was a new post.

I’m beginning to really like these new forums (they were really confusing initially). They’re really a lot better than other forums.

I’ll go and check the article now, thanks for uploading the chart…


#5

The last chart that people are talking about makes the case for buying European Small cap but there are other options beside this trust that may be better.

Does anyone own anything from this company? I’d never heard of them, they’re sort of on the fringes of the investment trust world.

I think I would look first at TR European Growth or European Assets or JPMorgan Euro Smaller Companies. These guys just don’t have the track record for me.


#6

I’m not sure I agree with you there in discounting Montanaro so much @stromer. They haven’t really been on my radar either though I had heard of them.

I think how they describe how they invest and the processes they go through is pretty interesting, and certainly what that chart also shows, and I think this is what @dicem who wrote the article was getting at is the type of companies they own, quality growth companies these describe it as being, are about to have their day in the sun. So it’s not, as I read it anyway just about European smaller comps about to do well it’s also growth companies are going to do well.

I’m not sure the other Euro smaller company trusts you mentioned are invested on the growth/value\income spectrum.


#7

Just because you haven’t heard of it doesn’t mean it’s not any good. This sort of trust is a bit like the value orientated funds, you have to hold it for potentially a long time to get good returns but when they come they can more than make up for the barren periods.

The European Investment trust from Edinburgh Partners is similar though they invest in value stocks.

My hunch here is this probably will do very well in the next 1-3 years.

And looking at the type of investors they manage money for they’re mostly pension institutions and other fund managers. Perhaps that’s why they have such a low profile with retail investors, because we’re not their target market.


#8

Would you choose this over some of the better know trusts though @casper? I mean if you had to choose one of them.


#9

I’m not sure @galestone because I’ve not looked at them closely enough but what I would say is this looks pretty good to me. I’m inclined to agree with @dicem that this might be an opportune moment to buy. You may have to wait a little while but not long I think.


#10

I wouldn’t be investing anything in Europe until we know the outcome to this never ending Greek tragedy.

Once things have settled down though I reckon a smaller companies trust in Europe would be a good idea. Not sure what is the best option though, European Assets has been a bloody good performer the past few years. I think I’d probably lean towards that though they might be on to something here.

Montenero European is one to watch for me for the moment.


#11

On the contrary, now is the time to consider investing in Europe and Montanaro is reasonably good way to do it.

They are classic growth investors who have a long track record of investing very profitably.

They have underperformed for the past three years precisely because they’re done exactly what they said they would do and only invest in quality growth stocks. It isn’t there fault that the stock market fashion has been for something else. If you are patient investor in a strategy like this you should expect to more than make it up in the good years.


#12

I don’t understand what is meant by small cap and large cap. This might sound like a silly question but I have never heard those terms before?


#13

If you look at the chart concerning the quality of the portfolio it really stands out to me that they are doing here what they say they’re doing.

Take a look:

That to me says that it is both a quality portfolio and a growth. It is certainly a more expensive portfolio on a P/E basis but look at the sort of growth you are getting for your money.


#14

I kind of get this, even Spain and Portugal are doing much better in Europe. It’s taken much longer for Europe to recover than it’s taken the US and UK. So if growth is returning it makes sense that a fund focused on growth is going to benefit.

Unlike some others here I don’t mind that I’ve never heard of Montanaro before, I care more about how they manage money and how established they are and they seem to tick the right boxes there.

It looks like the discount has narrowed a little bit since this article was published, maybe people have bought it off the back of this, and this has brought the discount in.

I think I’m going to follow them.


#15

Whenever a fund has had a period of underperformance, have a look to see what the manager has to say about it. If it is a subject that is glossed over then avoid the fund. If it is a case of the particular investment style having been out of favour, e.g. growth vs. income, then consider whether you believe that the style will be back in favour for enough to deliver to your own investment horizon.

One approach to overcoming short-term underperformance is to have patience - or buy a tracker!

I did consider MTE a few years back when I was looking at smaller companies for long-term growth holdings. In the end, I didn’t because this would have meant holding more funds instead of reducing their number. That, and my main objective is income.

I will also say that both European and North American smaller companies are sectors where I would also consider OEICs.

Name me Heretic! if thou shalt! So be it!

http://lexicon.ft.com/Term?term=market-capitalisation


#16

Do you think the OEIC options are better for European/US smaller companies @arkwelder ?

I’m more of a growth investors, or maybe growth and income really and their is a reasonably convincing case made here for considering this trust.

It does have a lower profile than other trusts but it’s from a smaller fund manager who likely don’t have the resources of the larger managers. I would worry a little that it’s low profile might lead to a much wider discount in down markets because investors tend punish more trusts or companies they don’t understand or know much about.


#17

Not necessarily better, but the tiny number of IT options in these sectors means that OEICs it might be worthwhile to consider them. I looked at Threadneedle for both along with GAM North American, but in the end I didn’t go down the smaller-companies route for the reason previously given.

A different story for the Global and UK sectors, though, where there are plenty choices (unless there is a specific need to boost income, in which case there are a few OEICs that make money by writing covered options - and that deliver a higher yield than the ITs that do similar).


#18

Yes there are fewer trusts overall. I tend to favour them but not religiously. They are not perfect after all but they do have a couple of things in their favour in my view such as having an independent Board (supposedly), holding back income and gearing.

I think for me Montanaro seem like a decent option. I’ll hold it in my SIPP and it could be there for a long time, depending on the performance.


#19

European Assets is probably more suited to someone looking for a dividend. This Montenarro trust goes for growth and so is more suable for younger blokes, and blokettes (did I just make up a new word there?).

I think the chart that @citygirl reposted here is quite central to why you should consider this.

I’ve got decades to go before I need to think about getting an income from y pension (I hope), but my time horizon isn’t anything like that long 5-10 yrs max. But this looks like it’s worth a go.