Three European small cap stocks with a big future

Professional investor Francesco Conte picks three European small-cap stocks that should generate sustainable earnings in an ever more competitive global environment.

Each week, a professional investor tells us where he'd put hismoney. This week: Francesco Conte of the JPMorgan European Smaller Companies Trust picks three winners.

The global market backdrop appears challenging, but we are keen on European smaller companies owing to a positive outlook for earnings growth combined with market valuations close to long-term averages. The JPMorgan European Smaller Companies Trust seeks out dynamic companies with strong growth prospects that are independent of the economic cycle. Many of these tap into exciting structural growth themes such as environmentalism, ageing populations, wellness and digitalisation.

High importance is placed on environmental, social and governance (ESG) issues. Well governed companies that respect the environment and nurture their employees as well as wider society are more likely to generate sustainable earnings in an ever more competitive global environment. Here are three stocks that tick these boxes:

Falck Renewables: the future of energy

Falck Renewables (Milan: FKR)

Incredible technological progress has resulted in huge efficiency improvements in solar and wind power generation over the last decade and this is expected to continue. In many regions renewable energy generation is now cheaper than its conventional counterpart, while the demand for renewable energy continues to climb. Falck has a large development pipeline, resulting in extremely attractive long term growth prospects.

AAK: aplay on healthier eating

AAK (Stockholm: AAK)

The strong management team has a fantastic record of delivering consistent organic sales growth, margin expansion and selective acquisitions. AAK has developed strong relationships with clients through co-development of niche, technically advanced products. This supports the company's pricing power, helping it deliver a high return on capital.

Bravida: environmentally sustainable buildings

Bravida (Sockholm: BRAV)

The company's asset-light business model allows it to generate strong free cashflow, which it uses to reinvest in new growth opportunities. Bolt-on acquisitions have complemented the company's high organic growth potential. We believe that the company's excellent long-term outlook is not reflected in its attractive valuation.

Recommended

Three clean energy stocks for your portfolio
Share tips

Three clean energy stocks for your portfolio

Professional investor Christian Roessing of the Pictet Clean Energy Fund highlights of his three favourite stocks at the forefront of the clean energy…
25 Jan 2021
Eternal growth: how to invest in the future of the drinks industry
Share tips

Eternal growth: how to invest in the future of the drinks industry

Humans have been dabbling in tasty beverages for millennia. Jonathan Compton assesses the key trends in the sector and recommends seven hard- and soft…
22 Jan 2021
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
22 Jan 2021
DoorDash won't deliver for investors. Here's how to short it
Trading

DoorDash won't deliver for investors. Here's how to short it

American food-delivery app DoorDash can’t even make money in a pandemic. Matthew Partridge explains the best way to short it.
20 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021
When will the US stockmarket bubble burst?
US stockmarkets

When will the US stockmarket bubble burst?

With US stocks more expensive than before the Wall Street crash of 1929, there are growing signs of “mania”. But what will push markets over the edge?
22 Jan 2021