Top-quality, rapidly growing European stocks are selling at enticing valuations
Timothy Lewis, portfolio manager at JPMorgan European Growth & Income tells us where he’d put his money


The JPMorgan European Growth & Income trust seeks to invest in quality businesses at attractive valuations. By this, we mean well-run companies that produce strong and sustainable returns on invested capital, where earnings per share translate to tangible cash flow, and also those with management teams making sensible decisions with their capital.
One of the most important attributes we look for in companies is improving operational momentum. One way to assess this is by tracking management guidance and earnings-per-share expectations to see whether they are being upgraded or downgraded over time.
In this regard, Europe provides a rich opportunity, thanks to extreme valuation discounts relative to US peers, the much-improved quality of the firms in our index and the strengthening macroeconomic backdrop. Below are three long-standing holdings in the trust, firms that have displayed strong operating momentum for some time and should be able to continue that performance in the future.
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A monumental medical leap forward
Novo Nordisk (Copenhagen: NOVO-B) is unique in the pharmaceuticals sector in that it has been almost completely focused on insulin and diabetes for more than a hundred years. It has leveraged its strength in diabetes care into a leading position in the interrelated issue of obesity. Obesity has posed significant challenges for medical practitioners worldwide. Despite advances in healthcare, effective treatment options for obesity have been limited, often culminating in surgical interventions as a last resort.
However, the introduction of Novo Nordisk’s pioneering new drug Wegovy represents a monumental leap forward in the realm of weight-loss treatments. With efficacy levels comparable to surgical procedures, but with significantly reduced risks, Wegovy has emerged as a game-changer in the fight against obesity. Patients’ interest in this revolutionary new drug has continued to exceed expectations, leading to strong operating momentum for the business, but with a market opportunity that can justify sustained growth.
As interest rates have normalised over the past few years, Italy’s UniCredit (Milan: UCG) has experienced an expansion in net-interest margins. This uptrend has resulted in frequent upgrades to earnings forecasts, supporting the sector’s robust performance amid changing market conditions. But valuations for banks such as UniCredit remain compelling, offering an attractive entry point for investors.
Furthermore, thanks to strong capital positions, banks are able to return cash to shareholders through dividends and share buybacks. This shareholder-friendly approach underscores UniCredit’s commitment to delivering long-term value and solidifies its position as an enticing opportunity within the banking sector.
Pioneering Publicis
Ten years ago, Publicis (Paris: PUB) began a journey to lead the advertising industry in data and technology, which included two large acquisitions, Epsilon and Sapient. That journey hasn’t been without bumps in the road, with Covid, a challenging macro-environment and the integration of these two acquisitions to navigate.
However, Publicis is now in a stronger position and has emerged into a much more supportive economic backdrop. It has elevated itself into a “transformation partner” that is data-driven and puts technology first, and which is better able to meet clients’ needs and win market share. Publicis is now the standout leader in the field and looks set to continue that growth.
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Tim Lewis, Executive Director, is a portfolio manager within the J.P. Morgan Asset Management International Equity Group, based in London. He has a particular focus on core Europe mandates. An employee since 2013, Tim joined the firm as a graduate trainee. He obtained a BA in Business and Economics at Trinity College Dublin, and an MSc in Behavioural Economics from the University of Nottingham and is a CFA charterholder.
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