Portfolio Update
The information contained in this release was correct as at 30 November 2024. Information on the Company’s up to date net asset values can be found on the London Stock Exchange website at:
https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)
All information is at 30 November 2024 and unaudited.
Performance at month end with net income reinvested
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| One Month | Three Months | One Year | Three Years | Launch (20 Sep 04) |
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| Net asset value (undiluted) | -0.1% | -7.4% | 6.3% | -9.3% | 731.6% |
| Share price | 0.2% | -7.9% | 5.7% | -18.1% | 680.2% |
| FTSE World Europe ex UK | -1.3% | -4.6% | 8.2% | 15.9% | 435.1% |
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 591.68p |
| Net asset value (including income): | 591.80p |
| Share price: | 548.00p |
| Discount to NAV (including income): | 7.4% |
| Net gearing: | 10.4% |
| Net yield1: | 1.3% |
| Total assets (including income): | £580.0m |
| Ordinary shares in issue2: | 98,013,150 |
| Ongoing charges3: | 0.95% |
1Based on an interim dividend of 1.75p per share and final dividend of 5.25p per share for the year ended 31 August 2024.
2Excluding 19,915,788 shares held in treasury.
3The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, write back of prior year expenses and certain non-recurring items for the year ended 31 August 2024.
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| Top 10 holdings | Country | Fund % |
| Novo Nordisk | Denmark | 8.0 |
| RELX | United Kingdom | 7.3 |
| ASML | Netherlands | 5.8 |
| Schneider Electric | France | 5.3 |
| Safran | France | 4.7 |
| Partners Group | Switzerland | 4.6 |
| Ferrari | Italy | 4.3 |
| Hermès | France | 4.1 |
| Linde | United States | 4.1 |
| Allied Irish Banks (AIB) | Ireland | 3.7 |
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Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing the Investment Manager noted:
During the month, the Company’s NAV was flat at -0.1% and the share price returned 0.2%. For reference, the FTSE World Europe ex UK Index returned -1.3% during the period.1
Europe ex UK equities were down in November. The disparity in performance between European and US equities became more prominent during the month following the result of the US election. Comparatively stronger US macroeconomic data and investor confidence, bolstered by expectations of deregulation and fiscal stimulus, drove US markets. On the other hand, Europe faced slightly worsening economic conditions, highlighted by declining PMIs (the Purchasing Managers’ Index) and negative economic surprises, likely exacerbated by uncertainty from US tariffs and the political backdrop in France. One area which shows continued progress in Europe is inflation, supporting continued interest rate cuts into 2025.
European markets were driven by expectations of what President-elect Donald Trump is likely to implement when he comes into office. Over the period we also had the remainder of the Q3 earnings. In summary, corporate reporting highlighted ongoing trends: weakness in the automotive sector, polarization in the luxury market, industrial short-cycle businesses awaiting a demand rebound and strong performance from long-duration, capex focused companies.
Going into next year, we maintain a cautiously optimistic outlook on European equities, given the combination of very low sentiment, attractive valuations and the prospect of faster monetary easing in Europe compared to the US. As interest rates come down there are cyclical sectors such as construction and other short-cycle industries that have faced significant challenges which could see a recovery from depressed levels.
Within the reference index, sectors such as technology performed strongly thanks to post-election optimism and strong investor sentiment. Telecoms also rose, while sectors including materials and the consumer sectors fell.
The Company was ahead of its reference index during the month, largely driven by stock selection whilst sector allocation was also positive.
In sector terms, the portfolio benefited from an overweight exposure to industrials, particularly those with high exposure to the US, with Trump's clear pro-business mandate being seen as beneficial for growth and capex spend. Similarly, the portfolio’s higher allocation to technology was positive as ‘animal spirits’ kicked driving many cyclical shares higher.
On the flip side, a lower weight to financials detracted, although significantly offset by stock selection. Higher weights to consumer discretionary and materials detracted from active returns.
From a stock specific perspective, there were a number of positive contributors driven by the factors mentioned above. For example, information and analytics company RELX was also amongst the best performers, with approximately 55% of its revenue coming from North America and the company's operations in the US span across its various business segments, including scientific, technical, and medical information, risk and business analytics, legal, and exhibitions.
Linde also benefited from strong exposure to the US. At Q3 results, Americas represented about 43% of sales but 72% of the project backlog, indicating strong opportunities for further growth in the market.
Aerospace company Safran was also amongst the top performers over the month, benefiting from strong results in the previous month where trends in the market continue to be favourable.
Within financials, the portfolio benefited from its exposure to Partners Group, an alternative asset manager. Shares performed strongly during the month as financing conditions and deal activity continues to improve. There is also increasing optimism around potential deregulation and tax cuts in the US, which could create a favourable environment for private equity investments.
In the technology sector, BE Semi provided the top positive attribution effect as shares bounced off recent weakness that had been driven by the broader semiconductor sector sell-off. Whilst traditional packaging markets have yet to recover, there is optimism that we are at the bottom of the cycle, while their more advanced Hybrid Bonding technology is also seeing encouraging order trends.
Shares in Chemometec continued on a positive trajectory over the month. The company released encouraging results for the July-September quarter and upgraded its full-year 2024/25 revenue and EBITDA guidance. We remain encouraged by the company’s accelerating top line momentum driven by new launches.
On the negative side, a holding in Kingspan was the largest detractor following a trading update that guided to flat year-on-year EBIT, a small cut to expectation. Whilst price-cost has been a headwind for Kingspan in 2024, the results demonstrated improving volume dynamics and also solid order intake which should be bode well for 2025.
Finally, shares in Ferrari detracted in the month, having performed well for much of the year. The company reported overall solid results but there was a lack of upgrades which led to some profit taking. Management expressed their increased confidence in earnings over the medium term supported by a full order book.
Outlook
We believe underlying economic conditions remain robust with consumers and corporates in healthy positions. Inflation is retreating and rate cutting cycles have begun in earnest across the globe, which increases investor propensity to move up the risk curve in search for higher returns. We continue to take scaled and deliberate cyclical risk in European equities as profitability continues to be resilient in many European cyclicals, with their sensitivity to economic shocks and the domestic economy significantly reduced. After a long period of underinvestment, long duration and structural investment spend is now in place to support these businesses and their underlying earnings should move higher over a multi-year period.
Alongside investment opportunities afforded by structural forces, such as the energy transition or AI, we also detect a cyclical upturn in a variety of industries like construction, life-sciences and chemicals which have suffered from pronounced volume declines for the best part of two years. We remain positive on the outlook, given a structurally improved market composition in Europe, potential for a cyclical recovery, and valuations in the European market at a record wide discount relative to the US.
1Source: BlackRock
16 December 2024
ENDS
Latest information is available by typing www.blackrock.com/uk/brge on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
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