Argonaut's Norris: Europe is not heading for recession

Kate Marshall | Tue 29 March 2016

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Our view on this fund

Barry Norris has built an exceptionally strong track record in managing European equities. Under his stewardship since May 2005, the FP Argonaut European Alpha Fund has grown by 204.4%* compared with 114.3% for the IA Europe ex UK sector, although please remember past performance is not a guide to future returns.

Source: Lipper IM to *01/03/2016. Past performance is not a guide to future returns.

Our analysis suggests the manager's good performance is a combination of positive stock selection and positioning the fund towards some of the better-performing sectors and geographical areas. Our research also shows that Barry Norris is prepared to be flexible and actively change the positioning of the fund based on where he views the best opportunities. It is an approach that has proven favourable over the long term although it does mean the portfolio could behave quite differently to others in the sector.

This fund currently features on the Wealth 150 list of our favourite funds across the major sectors.

Portfolio review

Some investors are questioning whether Europe can sustain its slow recovery, however Barry Norris does not believe the continent is heading towards recession. The European financial system is in much better health than during the 2008 financial crisis, while the economy is also receiving an unprecedented amount of stimulus from quantitative easing from the European Central Bank; a pickup in bank lending; a weaker euro (boosting the competitiveness of exporters); and a lower oil price (benefiting the consumer).

Over the past year the manager has avoided more defensive areas of the market - such as healthcare and consumer staples - which performed well in 2015. Nevertheless, the fund still managed to deliver a strong performance, thanks to the manager's stock picking and a bias towards higher risk medium-sized companies which outperformed larger businesses. Avoiding commodity-related sectors, such as energy and basic materials, also helped performance.

Geographically, a bias towards countries such as Ireland and Denmark, whose stock markets generally performed well, boosted returns. In Ireland, low-cost airliner Ryanair contributed positively to performance, as did Danish wind turbine manufacturer Vestas Wind Systems.

Barry Norris aims to identify companies he believes have the potential to deliver positive earnings surprises. He often takes a contrarian view, and currently has a preference for domestically-focused, economically-sensitive companies. Current holdings include Euronav, the largest owner of oil tankers worldwide. While the stock has struggled in the short term, Barry Norris is positive in his outlook for the business. He expects the demand for oil tankers to pick up in the near term as the amount of cheap oil being pumped around the world increases.

Please note this is a concentrated portfolio which enables each holding to make a significant impact on returns however this is a higher-risk approach.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.