Three innovative European companies that are set for long-term growth
Europe offers fertile ground for investors, says Mark Denham, head of European Equities at Carmignac. Here, he picks there e of his favourite stocks
We firmly believe that Europe offers fertile ground for investors. Investors unnerved by political and economic uncertainty have overlooked many opportunities. The most reliable way to uncover companies with the best long-term growth prospects is to seek out “compounders”: names that score highly in terms of sustainable profitability, reinvestment for the future and Socially Responsible Investing (SRI).
Secular growth is what we look for and innovation is what will sustain it in the long run. Innovation can be found in an array of sectors. For example, as the stocks below illustrate, it is widespread within the healthcare industry; it is at the core of the biotech sector and it is key for selected industrials.
Novo Nordisk: defeating diabetes
Novo Nordisk (Copenhagen: NOVOB) is a global healthcare company headquartered in Denmark. It boasts more than 95 years of innovation and leadership in diabetes care, fuelled by a strong research and development pipeline.
The company is expanding its global leadership position in obesity, while it is also active in combatting other serious chronic diseases, such as haemophilia and growth disorders.
Given growing price pressure on diabetes treatment, Novo Nordisk has invested heavily in research and development in order to come up with an oral version of its diabetes treatment (diabetes drugs are normally injected). This product will grow the overall diabetes drug market by offering a different treatment, while it will also provide competition for other types of oral drug.
Galapagos: a biotech set to bounce
Contrary to popular belief, there are several reasonably sized biotech names in Europe that have the potential to do better than their benchmarks.
One name that performed nicely in 2019 and presents the long-term prospects we look for is Galapagos (Amsterdam: GLPG). Galapagos is a medium-sized clinical stage biotechnology company specialising in the discovery and development of small-molecule and antibody therapies (designed to boost the body’s immune system).
The company’s research mainly focuses on inflammation, fibrosis and metabolic problems. It aims to begin six or seven new projects a year and has an active portfolio of around 30 projects.
Assa Abloy: lock in profits
Assa Abloy (Stockholm: ASSAB) is the world’s leading producer of locks. The company manufactures a wide range of mechanical and electrical locks, as well as more sophisticated access and identification systems. It not only meets our financial criteria, but also stands out owing to its quest for innovation.
Assa Abloy is constantly renewing its product range, to the extent that it has even set a target: 25% of its turnover should stem from products launched within the last three years. Its most recent innovation is the “smart lock”, a device that locks and unlocks doors remotely – by using a smartphone, for instance.
Assa has also formed a partnership with Amazon that allows parcels to be delivered when the customer is absent. Given that there are almost 40 million users of the Amazon Prime service, we believe this innovative product has huge potential.