Der in den beiden Verwaltungs-Strategien SJB Substanz und SJB Stars enthaltene ECP Flagship – European Value Fund A (WKN A14YQK, ISIN LU1169207518) legte im dritten Quartal 2019 eine Konsolidierungsphase hin und generierte eine Wertentwicklung von -5,21 Prozent in Euro. Marktstratege Léon Kirch verfolgt in dem europäischen Aktienfonds eine streng an Value-Kriterien ausgerichtete, langfristig orientierte Investmentstrategie. Erfahren Sie in Kirchs FondsManager-Bericht, wie die ECP-Strategie auf die wirtschaftlichen und politischen Entwicklungen der letzten Monate reagierte. Der jüngste Quartalsbericht (Teil 3) analysiert im Detail die aktuellen Marktbedingungen und schließt mit einem Fazit zu den Auswirkungen für die künftige FondsEntwicklung.
The estimated dividend yield for the STOXX 600 for 2020 is currently 4%. In comparison to the negative bond yield for the German 30 year and Swiss 50 year government bonds, It is fair to say that we live in unusual economic times: Central banks have taken exceptional measures of quantitative easing, geopolitical uncertainties, recession fears are abundant and tariffs wars are amplified by Tweets. The flight to perceived safety in government bonds has been unprecedented. More than 30% of the worldwide bonds in
issue are currently yielding negative interests, giving investors a guarantee to lose money if these bonds are being held to maturity. Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets”. The opportunity in European equities in general and European value stocks looks very indeed compelling for a contrarian investor. The spread between bond yields and dividend yields is now the highest over the past 100 years.
At ECP, we are not building portfolios for the mere goal of maximizing dividend yields. We are shying away from most banks, utilities and telcos despite their high dividend yields. However we currently have positions in the portfolio that have unseen dividend yields. Examples are the asset managers Anima and Standard Life Aberdeen, offering current year dividend yields of 4.8% and 7.5% respectively, the chocolate producer Cloetta with 4%, G4S with 4.9%, Publicis with 6% or the oil service provider Wood Group with 7.8%. We have today the opportunity to buy a portfolio of undervalued quality companies at a historically high discount in European equity markets, a neglected asset class plagued by constant investor outflows. If we forget about the daily price moves that are more a function of the investor mood and the unpredictable political noise level, we are being paid a solid dividend yield for waiting while our companies continue to produce cash flows. It is certainly not the moment to panic in the value equity space !
Recently we read in one Bloomberg article “Public markets aren’t paragons of rationality, with the wisdom of the crowd repeatedly giving way to the mania of the mob.” It does make us Value Investors now and then scratching our heads looking at some of the valuations being paid for perceived stable growth businesses. That will eventually change going forward.
Fazit
The current environment creates opportunities for the long-term investors we are. Staying rational and having a consistent view of the intrinsic value of a company are two cornerstones in our investment process. When investing in “out of fashion” companies it requires that you go against the crowd. More often than not, it involves increasing the position when prices are dropping. Therefore, we have always held the view that volatility ultimately is a good thing for the long-term investor. For 20 years this has generated healthy long-term returns for our strategies. The flip side is that being contrarian always involves the risk of looking foolish, sometimes even for an extended period. This is just something we have to accept.
In our existing portfolio the margin of safety of the median company is currently at 37%. It is one of the highest margin of safety we have seen since we launched the European strategy at ECP in Dec 2014 and probably one of the highest we have seen since the bottom of the market after the financial crisis in March 2009. We are very comfortable with our valuation models. Our portfolio is positioned very attractively for the long-term investor. European equities is an unloved asset class and value stocks are at a historically high valuation discount to their growth peers. We need to remember that we are now laying down the foundations of our performance for the next 4 to 5 years. We search for companies that are significantly mispriced in relation to what we believe is the earnings power of the company in a normal year. That is always the start of our journey: The early bird catches the worm.
