The European Investment Trust
Review of management arrangements
19 June 2019
The European Investment Trust (EUT) is managed by Craig Armour at Edinburgh Partners. This company follows a strict value-based investment process, based on the philosophy that there is a stable relationship between expected share price total returns and a company’s current share price compared with its long-term earnings per share (see chart below). In recent years, global markets have been led by growth rather than value stocks, and EUT’s investment performance has consequently lagged that of its benchmark FTSE All-World Europe ex-UK index. The board has announced that it is undertaking a review of EUT’s management arrangements and will update shareholders in due course. MORE »
Trade dispute weighing on investor sentiment
7 January 2019
The European Investment Trust (EUT) is managed by Craig Armour at Edinburgh Partners (EP, which is now a wholly owned subsidiary of Franklin Templeton Investments). He aims to generate attractive investment returns from a diversified portfolio of continental European equities, employing a disciplined, valuation-based stock selection strategy. The manager believes investor sentiment has become too negative, on the back of slowing global growth in response to the US/China trade dispute. He says that as a result, many sectors of the European stock market – including industrials and other cyclicals – are looking attractively valued. EUT’s board has a progressive dividend policy and the trust currently offers a yield of 3.5%, which is the highest for a non-income-focused fund within the AIC Europe sector. MORE »
Managing risk in a transition period
21 June 2018
The European Investment Trust (EUT) adopts a strict valuation-based investment approach to construct a relatively concentrated portfolio of stocks that can be held for the long term. Manager Craig Armour says that monetary conditions are slowly normalising following the extreme policies adopted as a result of the global financial crisis. He believes that this process will lead to an increase in stock market volatility, which will in turn lead to a greater investor focus on company valuations. Armour has been selectively adding attractively priced new positions to EUT’s portfolio across a range of industries. However, on balance he has been taking some risk off the table by reducing the fund’s cyclical exposure. MORE »
Maintaining disciplined valuation-based approach
7 December 2017
The European Investment Trust (EUT) has been managed by Edinburgh Partners (EP) since 2010. Lead manager Craig Armour employs EP’s strict valuation-driven investment process, aiming to generate long-term capital growth from a diversified portfolio of continental European equities. Following a period of outsized equity returns, Armour says that investors will once again pay more attention to individual company fundamentals and valuations. Since July 2017, EUT pays semi-annual, rather than annual dividends. While the focus is on capital rather than income growth, the ordinary distribution has increased every year since 2009. EUT’s current yield, including indicated and special dividends, is 2.5%. MORE »
Improving performance under new lead manager
6 June 2017
The European Investment Trust (EUT) aims to generate long-term capital growth from a diversified portfolio of European equities. Since August 2016, EUT has been managed by Craig Armour, who follows the disciplined Edinburgh Partners valuation-driven investment process, aiming to buy stocks that are trading on a five-year P/E multiple (Y5 P/E) of less than 11x. The manager is currently more cautious on the outlook for continental European equities as EUT’s portfolio Y5 P/E is towards the high end of its 7x to 11x long-term historical range. As a result, EUT is currently ungeared and Armour is not planning to increase cyclical exposure in the near term. Near-term investment performance has improved versus the peer group and the benchmark, and EUT has increased or maintained its ordinary annual dividends since 2009. MORE »
Business as usual under new manager
26 October 2016
The European Investment Trust (EUT) aims to provide long-term growth in capital from a diversified portfolio of European ex-UK equities. There has recently been a change in lead fund manager; however, Craig Armour follows the tried and tested Edinburgh Partners investment process, which aims to select stocks based on a five-year P/E multiple (Y5 P/E). Evidence suggests the best performing stocks have a Y5 P/E of less than 11x; EUT’s portfolio currently has an average Y5 P/E of c 9x. Although the primary focus is on capital growth rather than income, ordinary dividends have been maintained or increased since 2009; the current dividend yield (including a special dividend) of 2.1% is above the peer group average. MORE »
Concentrating on long-term value
13 June 2016
The European Investment Trust (EUT) focuses on continental European stocks expected to deliver superior returns based on five-year earnings forecasts. Performance has weakened over the last 12 months on market volatility and outperformance of growth stocks. However, the manager is sticking to a disciplined, valuation-driven process; expensive names have been reduced and the concentration in core ideas increased. Moreover, the trust moved from net cash to net gearing in February, towards the recent market lows, when the average year five P/E fell to a cyclical low of 7.5x. Despite a widening of the discount back to historical averages, the share price total return has outperformed the benchmark over the last five years. MORE »
Europe specialist with strong valuation discipline
26 June 2015
The European Investment Trust (EUT) is a focused portfolio of continental European companies chosen for their ability to outperform the market on a five-year view. Valuation is a key tenet of the investment process, with the manager working on the basis that the best-performing stocks will be those with a year five P/E ratio of 11x or less. Because of the strong valuation discipline, the portfolio may underperform peers in a bull market, although both NAV and share price total returns have been ahead of benchmark over most periods under the current management. While the main focus is on achieving capital growth, EUT also currently yields in excess of the peer group average. MORE »
Looking through the short-term noise
21 October 2014
The European Investment Trust (EUT) aims to achieve long-term capital growth from a portfolio of continental European companies chosen for their potential to outperform over a five-year time horizon. Medium-term outperformance points to some success in achieving this objective. Over the past six to nine months there has been a major rotation in the portfolio, with the manager taking profits from cyclical stocks bought when they were out of favour, and tilting the portfolio towards healthcare, where improved pipelines may translate into superior long-term performance. A recent correction in European stocks has seen the discount drift out a little wider (EUT’s share price hit a 52-week low on 15 October), after reaching a five-year low point in early October. MORE »
