What Have Fund Managers Been Buying?

April 2021: Our monthly delve into fund portfolios looks at which stocks Europe's most highly rated managers have been buying

Fernando Luque 29 April, 2021 | 11:17AM
Facebook Twitter LinkedIn

Euro in shopping trolley

There have been some changes to our fund lists in this monthly review. Firstly, two funds that had a "blend" style last month have moved to the "growth" side, perhaps indicating that the relative underperformance of the growth style versus the value style has pushed the managers of these funds to look for opportunities in this area of the market. These two funds are the M&G Pan European Select and the TM CRUX European Special Situations.

We have also seen the MFS European Research move from growth to blend. Finally, it is worth noting that at the beginning of the month the Invesco Pan European Structured Equity Fund changed its name to Invesco Sustainable Pan European Structured Equity. It also changed its investment objective as the fund takes a defensive multi-factor approach to stock selection, but we have not changed our view on the fund.

Large blend fund list

Large Blend

The Swiss company Nestlé (NESN) is clearly the favourite stock of our blend managers, so much so that it is present in the top 10 of each of them. It remains the top position in the MFS European Research and the Robeco QI European Conservative Equities. It is a company that Morningstar analysts believe has a strong competitive advantage underpinned by its entrenched position with distributors (an intangible asset) and an enduring cost advantage.

After revising the fair value estimate to take into account a better than expected first quarter, we have slightly increased our fair value estimate to 97 Swiss Francs per share from 94 Swiss Francs previously. But at these prices the stock looks a bit expensive and is trading with a Morningstar Rating of 2 Stars.

large blend stock list

Nestlé is also listed as the second position in the Invesco Sustainable Pan European Structured Equity, although it is actually the first stock in the portfolio, as the largest weighting in the portfolio is a money market fund.

As for the new additions to the blend funds' portfolios, two stocks from the communication services sector have made a strong appearance: the Dutch company Wolters Kluwer (WKL) in fourth position in the Invesco Sustainable Pan European Structured Equity portfolio and the Spanish company Telefónica in fifth position in the same fund.

Large Growth

We have not seen too many changes in the most repeated stocks of our large growth funds, except perhaps for the fact that the Danish industrial company DSV Panalpina (DSV), which provides transport services worldwide by road, air, sea and rail, is now present in three portfolios instead of two. It is present in the Allianz Europe Equity Growth, in the BGF European and in the M&G Pan European Select. In the latter fund it holds the number one position.

The bulk of its activities come from its European trucking network and its air and sea transport businesses. The company has, in our analysts' view, a narrow competitive advantage due to its network effect, but trades at somewhat high prices, which justifies its two-star Morningstar Rating.

large growth stock list


In the table of new Top 10 stocks, the return of Dutch communications company Prosus (1YL) to the top of the portfolio stands out (it was the number one position in December and November last year). One fund that has undergone drastic changes in its portfolio is BGF European, with three new companies appearing in the top 10: Netcompany Group, Teleperformance and Safran.

Large Value

UK-based GlaxoSmithKline (GSK) remains one of the first choices in our value funds´list. Our analyst comments: "As one of the largest pharmaceutical companies, GlaxoSmithKline has used its vast resources to create the next generation of healthcare treatments. The company's innovative new product lineup and expansive list of patent-protected drugs create a wide economic moat, in our opinion." Our target price of £18 implies a potential upside of more than 30% for the stock at current prices. That explains its Morningstar Rating of 4 Stars.

large value stock list

Regarding the new stocks recently added to the Top 10 of our selected funds, this month we highlight ING Group (INGA), which appears as the third position in the Kempen European High Dividend fund.

The Dutch bank is certainly one of our best bets in the European banking sector right now (it trades with a four-star rating). We recently increased our fair value estimate for narrow-moat ING to €14 a share, up from €13 previously; this reflects a more favourable view for loan-loss provisions and increased return of excess capital to shareholders.

 

What Have Fund Managers Been Buying?

All Posts

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.

Facebook Twitter LinkedIn

About Author

Fernando Luque

Fernando Luque  is Senior Financial Editor at Morningstar Spain