Results analysis from Kepler Trust Intelligence

BlackRock Greater Europe (BRGE)

10/11/2022

Results analysis from Kepler Trust Intelligence

BRGE’s annual results for the year ending 31/08/2022 show a decline in NAV on a total return basis of 29.2% and a share price total return decline of 33.4%. This represents underperformance of the FTSE World Europe ex UK Index (the reference index), which fell by 11.5%. While BRGE has a strong long-term track record of outperformance, in the last financial year its portfolio suffered due to a write-down in Russian stocks after the invasion of Ukraine and a sell-off in long duration growth stocks, as well as a few stock specific issues.

Chairman of the board Eric Sanderson commented: “ European equities continue to trade at a discount to global peers, providing attractive investment opportunities for our portfolio managers. The company’s portfolio is also weighted towards companies with well capitalised balance sheets and exceptional businesses that are able to adapt to the shifting market dynamics .”

Kepler View

Stefan Gries and Sam Vecht have a well-defined long-term investment strategy which has served BRGE shareholders well over the long term – in the five years to 31/08/2022 the trust has outperformed the reference index by 26% cumulatively (in NAV total returns). The sell off over the past year has to be seen in this context, and the managers remain committed to their approach. They highlight that operationally most of their long duration growth businesses have been performing well, and what has shifted is market sentiment and the valuation investors are willing to pay for growth.

The managers highlight that many of the best-in-class companies they own are trading at depressed valuations not seen in years, and we note BRGE’s own shares trade on a discount of 5.2% at the time of writing. After such a significant sell off we think the share price is looking increasingly attractive as a potential long-term entry point for those with a long-term view…

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