EUROPEAN MARKET REVIEW AND FUND PERFORMANCE
The European equity market returned 6.5% in January (MSCI Europe TR) and Small and Mid Cap stocks measured by the MSCI Europe SMID returned 4.8%.
European markets were strong in January, benefiting from a rotation out of US tech stocks triggered by the release of DeepSeek latest R1 model, a reasoning model that it claimed was comparable to ones from OpenAI and Google but trained at a fraction of the budget. This potentially called into question the need for elevated investment in advanced AI chips and data centre capacity. The European indexes also welcomed gradual ramp-up in trade tariffs by the US rather than aggressive one-time increases. The European Central Bank (ECB) cut interest rates as expected by a quarter of a percentage point and warned of headwinds to the Eurozone's stagnating economy. The decision to cut by 0.25% was unanimous and came hours after Eurostat reported that the Eurozone economy had not grown at all in the fourth quarter of 2024.
In that context, the top performers in the MSCI Europe were Carl Zeiss Meditec, Richemont and Nemetschek while Barry Callebaut, Alstom and Associated British Foods were the worst performers.
By sectors, Information Technology and Communication Services performed the best, up +8.7% and +8.5% respectively while Consumer Staples and Utility were the worst performers, up 2.2% and 2.4% respectively.
The Fund returned +6,0% in January (NA share class) versus 6.5% for its benchmark.
In January, our top three positions minus our bottom three positions had a net -13 bps impact.
STOCK PERFORMANCE: TOP CONTRIBUTORS
The top three contributors to the Fund’s performance in January were Spirax Group, Dassault Systemes and Pluxee.
Spirax Group: Spirax Group provides mission critical thermal energy and fluid technology solutions to customers in a diverse range of industrial sectors. The stock was up 16.7% (EUR) in January benefiting from Danaher’s comments noted that orders in Biopharma were strong in the last quarter of the year. Spirax Group is exposed for 10% of revenues to Biopharma.
Dassault Systemes: Software company focusing on Product Life Management, Digital Mock-up and 3D Design. After a challenging 2024 year, the stock was up 12.8% in January.
Pluxee: Pluxee is the leader in employee benefits offering. The share price surged after the company reported better-than expected revenues for the first quarter of its fiscal year 2025 and conformed its guidance. The stock was up 19.8% in January.
STOCK PERFORMANCE: TOP DETRACTORS
The three positions that detracted most from the Fund’s performance in January were Trainline, SGS and Richemont.
Trainline: Europe’s leading independent rail platform enabling travellers to book and manage their journeys. The UK Department for Transport has announced plans to become an online train ticket retailer by bringing together individual train operators’ websites. The announcement says the new retailer will work alongside a private sector retail market where all retailers can compete in an open and fair manner. The stock was down 11.3% in January.
SGS: Testing, Inspection and Certification company. The stock was down by 3.2% in January after Bureau Veritas and SGS confirmed being in discussions regarding a potential business combination and then updated the market at the end of the month saying that talks ended without agreement on the potential tie-up.
Richemont: Jewellery and watches group, owner of brands such as Cartier and Van Cleef, opened the reporting season for luxury companies on an exceptionally high note. Third-quarter organic sales, which cover their quarter ending in December, grew by 10%, significantly beating the consensus expectation of 1% growth. The stock was up 27.7% in January and we were underweighted versus our benchmark.
