“Investors are really starting to go sector specific as opposed to risk-on, risk-off,” Kumar said. “The rotation is suggesting that people are getting little bit more willing to take some risk. Rather than buying safe haven stocks and sticking most of your money in bonds, now you can go out and buy something riskier like Deutsche Bank but put a little in bonds to balance out the volatility. There are slightly more opportunities to diversify.”
On this theme, Hermes’ Crockford said he was finding most of his ideas in mid and mega-cap names in Europe’s industrials and tech sectors.
“In particular, we are looking for secular growers that also have a cyclical element to their revenues,” he said. “As always, we recommend focussing on the individual companies, and we pick the ones that we expect to be winners from these secular trends.”
But one aspect for investing in Europe has not changed – you need to have patience.
“People who invest in Europe expect a developed market but the journey ends up being more like investing in an emerging economy,” Kumar reflected. “If you can’t stomach that, you shouldn’t be there. No one is long-term enough to invest in Europe, but it is a reasonable place to be if you like good value rather than chasing Donald Trump’s tail.”
