Viewed through our Earnings, Quality and Valuation (EQV) lens, the Invesco International and Global Growth team remains optimistic on European equities given the region’s strong fundamentals. Since the second quarter, this trend has been consistent, and although some key metrics (such as retail sales) fell in both July and August, consumer confidence reached its highest level since April 2001, and the European Commission’s Economic Sentiment Indicator is now at its highest level since July 2007.1 This implies that gross domestic product growth in Europe could accelerate toward 3% in the near future.
Ask any investor in Europe what concerns them most, and election risk will likely be near the top of the list. With French elections underway,German elections looming, and the fallout from the U.K.’s Brexit vote ongoing, that concern is to be expected. However, the Invesco International and Global Growth team believes that election risk – while real – may be overstated. Looking through our EQV (Earnings, Quality and Valuation) lens, we believe that valuations in the highest-quality companies are expensive, but we have been opportunistic in finding new names that are seeing short-term dislocations.Leave a comment
The investment landscape in Europe is dominated by speculation on the future of Brexit and quantitative easing (QE). As bottom-up investors, our objective is to identify companies that we believe can thrive no matter what path these issues take. We do this by focusing on companies’ earnings, quality and valuation (EQV) characteristics. Looking toward the end of the year, here is what we see.
The end of 2015 didn’t bring any dramatic changes to European fundamentals. However, there have been some subtle shifts that the Invesco International and Global Growth team is keeping an eye on in 2016. While we didn’t initiate any new European positions in the Invesco International Growth strategy during the fourth quarter of 2015, recent volatility has brought some of the names on our “watch list” closer to the point where we would add them to the portfolio.Leave a comment
Historically, the Invesco International and Global Growth team has taken an underweight position in the energy sector because we believe that over the course of an economic cycle, few oil-and-gas producers can consistently earn above their cost of capital. Additionally, we see many management teams prioritize volume growth over returns – a strategy that eventually pushes prices down to or below the median break-even cost curve. But after the recent carnage in the oil markets, we’re beginning to dust off some of our energy-company files in search of opportunities.Leave a comment