Jupiter's De Fonclare: "We Want Companies That Benefit From Megatrends"

VIDEO: Jupiter European Special Situations fund manager Cédric de Fonclare tells Morningstar senior editor Holly Black that investing isn't about country or sector but finding companies that benefit from megatrends. 

Holly Black 25 June, 2019 | 1:45PM
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Holly Black: Welcome to the Morningstar series, "Why Should I Invest With You?" I'm Holly Black. With me in the studio is Cédric de Fonclare. He is the Manager of the Jupiter European Special Situations Fund. Welcome.

Cédric de Fonclare: Thank you.

Black: So, tell me a bit about the fund and what you're aiming to do.

Fonclare: Yes. Well, we're willing to invest into growing businesses where we've got reasonably high degree of confidence that they would be stronger franchise in three years' time than they are today and we're hoping obviously to pay a reasonable valuation for those names.

Black: So, special situations funds look for companies out of favour or on the brink of a turnaround. Is that easy to come across opportunities in Europe?

Fonclare: Well, there's more of this pressure in terms of valuations nowadays that never had been in the past. So, I guess, for a stock picker that's really the opportunity. When you look about the range in terms of valuation or the gap in terms of valuation between high-growth businesses and value stocks, this is probably the wider it has ben 2000 and the dotcom bubble. So, really, I think it's a good environment for picking the right stocks.

Black: And do you find, because you're covering a whole continent, do you find there are particular areas where you find more opportunities or that you tend to avoid?

Fonclare: I think from our point of view, it's less about country, it's less about sector, but we're trying to invest in companies which auto benefit from some kind of megatrends. So, if you think about the urbanisation, for instance, whatever happen in the economy, this is going to carry on. Today, we've got 55% of the world population which lives in cities and probably in few decades that will move to 60%, 68%. So, again, when you think about the world-leading breaking systems for trends, these happen to be a German-quoted company and here you can see big investments in China, and they've got all the retrofit in terms of selling spare parts and services which will lead the growth of that business.

Same will apply to other industry like outsourcing, if you think about Big Data, in terms of the world-leading network, telecom network equipment manufacturers, they happen to be also quoted in Europe. So, there's number of companies which clearly can disassociate from the low growth environment in Europe and do quite well.

Black: And do you have to pay attention to the political environment at all? Because obviously, the ECB has surprised people with its announcements lately and that must affect things.

Fonclare: Yeah, I think, we try to avoid highly regulated industries, because here political decisions can really impact the future and the growth of those businesses and cap also the return or the profit, they will be able to make. So, we like businesses which are quite agile and can sort of allocate capital where they see the growth opportunity, or they tend to be more international businesses. But really, beyond that it's very much stock-specific.

Black: Lovely. Well, thank you so much for coming in.

Fonclare: Thank you.

Black: And thanks for joining us.

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.

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Holly Black  is Senior Editor, Morningstar.co.uk