If countries were companies, who would represent Continental Europe at an investment World Cup? Ignis Asset Management suggests a team capable of lifting the trophy in South Africa.
Below, Ian Ormiston, football fan and manager of Ignis’ European Growth and Smaller Companies funds, selects 11 companies – each representing a developed continental European country – for an all-star dream team he believes would win an investment World Cup.
Each company’s selection is based on their performance in the 20 years since the 1990 World Cup in Italy. “Italia ’90 was a great World Cup,” says Ian. “It featured a genuinely good England team cheered on by the best-ever World Cup anthem. It was also a time when Italy was still a country revered by the world rather than reviled as a so-called ‘PIIGS’ nation.
“But Italia ’90, for England, also established a fact that has endured: the Germans are better at most things than us.”
Ever the ruthless fund manager, Ian has taken the cruel managerial decisions to leave at home the companies of two qualifying European nations – Greece and Portugal – and to fortify the spine of the team with Northern European grit.
Utilising a traditional European 4-4-2 system, the final 11 are as follows:
1. Roche Holdings
“In goal is the most traditional defensive of all. Roche is the stopper supreme as the manufacturer of the world’s greatest range of cancer drugs. The company has been a consistent grower of sales and profits since 1990 and earns its defensive status with returns that have stood up much better than most in the intervening 20 years.” Player Stats: Swiss. P/E 10.9x. Yield 4.6%*.
2. Ahold NV
“Not unlike the Dutch national team, Ahold has had a rather rocky ride over the last 20 years, but has emerged from its travails as a solid defensive company with great positions in its key markets. The two core assets of the group are its Dutch and US supermarket operations, which have performed well in the downturn and recovery in tune with local markets. Dollar exposure is a key strength of this defender.” Player Stats: Dutch. P/E 11.1x. Yield 4.6%. US sales 58% of total*.
3. Nestle (Captain)
“The defensive rock that most European portfolios are built on, Nestle has a staggering long-term track record. As well as its defensive attributes, the company has derived some of its longevity from its early move into emerging markets and is now more of a proxy for nominal global GDP growth than it is for its domestic market. Chances are that as the global audience settles down to watch their team in this year’s World Cup, most will have consumed one of Nestle’s products that day.” Player Stats: Swiss. P/E 15.1x. 78% of sales outside Europe*.
4. Wincor Nixdorf
“A small, fast-moving attacking wing back of a company, Wincor’s roots lie in the technology division of Siemens. The company emerged on to the stock market in 2004 and has subsequently proved itself as a consistent performer and global leader in the niche industries of ATMs, banking software and latterly reverse vending machines and supermarket self-checkouts. All of these niches offer customers of Wincor the opportunity to become more efficient.” Player Stats: German. P/E 12.8x. Earnings have grown 145% 2004-09*.
“The Ashley Cole of the team, small and again fast-growing but often very misunderstood. The company has reinvented itself from the Irish Agricultural Wholesale Society into a Swiss group that focuses on the convenience bread and cookie industries. By industrialising baking and offering retailers and restaurateurs the opportunity to cut costs, the company has outgrown most other defensives.” Player Stats: Swiss. P/E 10.9x. Leading croissant maker in France*.
“The classic holding midfielder, Eurazeo is a French thoroughbred. The company mixes investments in listed French companies such as Danone, Accor and Rexel with a portfolio of private equity investments that it nurtures. Holdings in car rental company Europcar and parking operator APCOA offer deep stores of value.” Player Stats: French. P/E 11.8x. 25% discount to quoted NAV*.
“A solid, long-standing German stalwart at the core of the team. The company is a good proxy for the German economic model with a spread of high tech and heavy engineering businesses combined with export-driven subsidiaries benefitting from the weak euro. It also has global operations which are able to source scarce growth outside the moribund European economies.” Player Stats: German. P/E 12.0x. Yield 2.4%*.
“As defending world champions, Italy just scraped a member into the team. Prysmian makes the cut as a strong niche player in a global industrial sector. Although the cable industry as a whole can be viewed as a sunset industry in the developed world, the better companies have focused on high margin, high growth areas such as high voltage power cables.” Player Stats: Italian. P/E 9.8x. Yield 2.9%*.
“Out on the wing comes a flying Dutchman in the form of ASML. The company is the world’s leading supplier of lithography systems, which are a key part of the semiconductor manufacturing industry. The company has been able to beat its key competitors Nikon and Canon to market in each generation as greater focus has proved to be a virtue. This cycle is likely to see a much higher peak than last time as semiconductor manufacturers have underinvested in the last 10 years.” Player Stats: Dutch. P/E 10.5x. Europe represented 1.7% of 2009 sales*.
10. Christian Hansen
“The Theo Walcott of the team, having only gained a listing on 2 June 2010. This pacey forward is unlikely to see disappointment four years down the line as it already has a long pedigree and has simply been resting in private equity ownership for the last few years. Its key businesses provide enzymes and cultures to the cheese and dairy industry and a natural food colour business that is seeing explosive growth.” Player Stats: Danish. P/E 19.0. Operating income grew 100% 2006-09*.
“The Fernando Torres or unexpected force at the spearhead of the team, Inditex has grown well beyond its Spanish roots in an impressively profitable manner. Having invented fast fashion through its Zara chain, the group has managed to grow impressively across the rest of Europe, America and Asia without losing control of costs. It is now generating substantial levels of excess cash.” Player Stats: Spanish. P/E 16.0. Operating income grew 6.5x 1999-2009*.
*Source: for all relevant statistics – Bloomberg at 07/06/10