M&G Investments has called Europe a ‘source of opportunities’ in a new article.
The article, which was published on a site for the financial and expat communities in Luxembourg, says that the continent has a number of companies with ‘strong potential, solid foundations, quality management, and attractive pricing’.
In the article, Loïc Pouget, associate sales director for the Belux region at M&G Investments, said the prevailing perception of value investing is often shaped by the US market, where growth stocks, particularly in the tech sector, continue to dominate. However, the European market presents a different landscape, potentially providing a more suitable backdrop for the value investing style.
He added: “In Europe, there is a wide range of players capable of delivering sustained performances over time and increasing their value, even in challenging economic conditions. These are the opportunities we aim to identify.”
These assets, M&G Investments said, can offer interesting performance prospects that are often uncorrelated with the volatility of international markets. However, it added this approach will need ‘rigorous active management’ alongside a ‘disciplined sell strategy’.
Pouget added: “”Our ‘value’ approach over the past three years has outperformed major European indices. For investors’ portfolios it provides greater resilience, as seen in 2022, while still supporting performance. We also see this value-driven opportunity in US and emerging markets.”
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These latest remarks come a few weeks after the firm compared the European and US markets, asking whether investors can reach for value in Europe or growth in the US.
Back then, Ivan Domjanic, a capital market strategist with the firm, said there were a number of value stocks within Europe that have catch-up potential.
Domjanic wrote: “The nice thing about value stocks with low valuations is that expectations regarding future earnings growth are generally very low. This means that future business performance does not necessarily have to be excellent for such stocks to generate decent returns. If the pessimism is great enough and the valuation is correspondingly cheap, low growth is often enough to provide a positive surprise.”
He added: “[…] value stocks in Europe currently enjoy a tailwind compared to growth stocks. However, this tailwind did not just start this year, but was already evident in the two previous years. Since 1 January 2022, the value segment in Europe has delivered a cumulative performance of almost 30%, while European growth stocks are barely in positive territory with an increase of around one percent in the same period (as at 15 November 2024, in euros).”
