Fund of the week: A strong play on European recovery

Investors can be forgiven for still feeling nervous about staking their money on Europe, given the continuing economic problems many countries, such as Greece, Spain and Italy, still face.

On top of that, European equities have enjoyed a strong run over the past two years, says Leonora Walters in the Investors Chronicle. However, with return on equity in Europe still way below that of the US, the market could have further to go.

One way to exploit this could be via Henderson’s TR European Growth Trust (LSE: TRG). The trust has achieved a “marked turnaround” under manager Ollie Beckett, who joined in 2011.

While over five years it underperformed its benchmark, over one and three years it has beaten sector rivals, as well as its benchmark Euromoney Smaller European Companies index.

Meanwhile, it has grown its net asset value (NAV – the value of its underlying portfolio) by 30%, compared to 24% for the index.

TR European Growth Trust chartBeckett is swift to point out that he invests in European stocks – not “European GDP”. He looks for undervalued opportunities, but combines number-crunching with meeting company management. He believes that trading conditions are improving in Europe and that there are ‘green shoots’ of recovery.

As such, he has geared the fund towards stocks that should benefit from improving domestic demand. Recent strong performers in the portfolio include German advertising firm Ströer and Danish ferry operator DFDS.

Analysts at Winterflood believe the fund is “attractive as a play on economic recovery” in Europe. It is also currently trading at a discount to NAV of nearly 10%. The ongoing charge is 0.9%.

TR European Growth Trust top ten holdings
Name of Holding % of assets
Brainlab 2.20%
Inficon Holding AG 1.50%
Comet 1.40%
Cie d’Entreprises CFE 1.40%
21 Central Partners III 1.30%
BE Semiconductor Industries 1.20% 1.20%
ASM International NV 1.20%
Anima 1.20%
DFDS 1.20%