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Oyster: 3 European Stock Picks

Mike Clements, manager of the Oyster Continental European Selection fund, picks three stocks for investors looking for growth

Emma Wall 10 August, 2017 | 8:02AM

 

 

Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and joining me today to give his three stock picks is Mike Clements, Manager of the Oyster Continental European Selection Fund.

Hello, Mike.

Michael Clements: Good morning.

Wall: So, what's the first stock today?

Clements: I think the first stock for me would be a company called Flow Traders (FLOW) which is a Dutch-listed company. And Flow Traders is Europe's largest market maker for exchange-traded funds, ETFs. So, what you get with Flow Traders is two things. You get exposure to the growth in passive vehicles. Passive investing is growing because of the cheapness and the ease of investing in the markets that way.

So, you get that through Flow Traders. But you also get a play on volatility. And as we know, volatility is very, very low at the moment. When markets are more volatile then people buy and sell ETFs left, right and centre and Flow Traders makes more money. At the moment, we are at the other end. And so, the share price of Flow Traders is quite low and on a long-term view, we think it's an extremely attractive investment.

Wall: Something quite compelling about an active fund manager making money out of more flows in passive fund management. What's the second stock today?

Clements: Second stock would be a company called doBank (DOB) which is not that well-known. doBank is the best way to play the Italian financial crisis. What they are is they are Italy's largest servicing company for collecting these non-performing loans. So, if you own some of these loans, you bought them cheap from the banks, you need to actually physically collect the money and you haven't got any way of doing it.

So, what you do is you outsource the physical collection of that money to this company doBank. And doBank takes no risk therefore. It just collects the money and takes a small percentage of it. So, it's a low-risk way to play the resolution of the financial crisis in Italy.

Wall: I suppose the question with that then is once the Italian crisis is fixed, this stock will perhaps no longer be such a compelling asset?

Clements: Well, yes and no. So, certainly, there's a backlog of loans that we need to be collecting and that's probably going to last over the next 5 or 10 years at least. And then on top of that you have the normal sort of defaults and loan problems that come up in every market. So, I think there's a long trajectory of growth ahead of it.

Wall: And what's the third stock?

Clements: So, the third stock is a company called Corestate Capital (CCAP). And this is what we like to do in our fund because we are pure bottom-up stock pickers and sometimes we can find companies which no one else has ever really heard of.

So, Corestate Capital is a German real estate investment manager, investing clients' money in German property. And it was relatively unknown by the market, say, 12 to 18 months ago. And what they have done in the meantime, they bought two businesses which have transformed it and made it a much larger business.

So, now, it manages €20 billion of client money. But yet, it's still unknown by the market. And if you compare the cash flow that you get from this company compared to some of its peers, it's still very undervalued simply because it's unknown. We still think there's a lot of opportunities in that business.

Wall: Now, property funds have been flipflopped around a lot in the U.K. They've been in the headlines because property tends to be quite linked to the underlying economy. Is that a positive thing in Germany?

Clements: Well, they are managing money for private wealthy individuals but also institutions who tend to take a longer-term view of the underlying markets. The German property market has been relatively strong, but there are still opportunities. And actually, what our company Corestate is very good at is it flies under the radar of the major investors. So, they are able to find deals which are better-priced and lower-risk than the average real estate investor.

Wall: Mike, thank you very much.

Clements: Thank you very much.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Corestate Capital Holding SA54.50 2.83-
doBank SpA10.69 EUR-0.74-
Flow Traders NV23.96 EUR-1.09-
OYSTER Continental Eurp Sel R EUR226.76 EUR0.02
About Author Emma Wall

Emma Wall  is Senior Editor for Morningstar.co.uk