BlackRock Greater Europe Investment Trust outperformed its reference index with NAV rising by 5.9%

BlackRock

Blackrock Greater Europe Investment Trust plc (LON:BRGE) has announced its latest portfolio update.

All information is at 31 October 2021 and unaudited.

To discover more about the BlackRock Greater Europe Investment Trust click here. 

Performance at month end with net income reinvested
 

One
Month
Three
Months
One
Year
Three
Years
Launch
(20 Sep 04)
Net asset value (undiluted)5.9%4.3%50.2%102.8%814.4%
Net asset value* (diluted)5.9%4.3%50.2%102.7%814.8%
Share price4.8%4.2%59.9%119.5%841.0%
FTSE World Europe ex UK3.0%2.2%33.8%43.0%369.8%

* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only):677.06p
Net asset value (including income):679.59p
Net asset value (capital only)1:677.06p
Net asset value (including income)1:679.59p
Share price:692.00p
Premium to NAV (including income):1.8%
Premium to NAV (including income)1:1.8%
Net gearing:5.7%
Net yield2:0.9%
Total assets (including income):£667.8m
Ordinary shares in issue3:98,265,411
Ongoing charges4:1.02%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.55p per share and an interim dividend of 1.75p per share for the year ended 31 August 2021.
3  Excluding 17,573,527 shares held in treasury.
4  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2021.

Sector AnalysisTotal Assets (%)
Technology23.6
Industrials22.9
Health Care17.1
Consumer Discretionary15
Financials9.2
Consumer Staples4.9
Energy3.8
Basic Materials3.5
Net Current Liabilities
—–
100
=====
Country AnalysisTotal Assets (%)
Switzerland22.3
Netherlands18.4
Denmark16.3
France11.7
Sweden8.1
United Kingdom5.7
Italy4.7
Russia3.9
Finland2
Ireland1.9
Spain1.9
Poland1.8
Greece1
Israel0.3
Net Current Liabilities  –
—–
100
=====
Top 10 holdingsCountryFund%
ASMLNetherlands7.4
Lonza GroupSwitzerland5.5
Novo NordiskDenmark4.8
LVMH Moët HennessyFrance4.7
SikaSwitzerland4.7
DSVDenmark4.1
RELXUnited Kingdom4.0
Royal UnibrewDenmark3.4
IMCDNetherlands3.1
HexagonSweden2.9

Commenting on the markets, Stefan Gries, representing the Investment Manager noted:

During the month, the Company’s NAV rose by 5.9% and the share price by 4.8%. For reference, the FTSE World Europe ex UK Index returned 3.0% during the period.

Europe ex UK markets rose during October. After markets appeared to have been driven by macroeconomic fears around China and inflation last month, company fundamentals came through again in October and markets focused on the ongoing Q3 earnings season.

The Company outperformed its reference index during the month, mainly driven by strong stock selection, while sector allocation was also positive.

In sector terms, the Company’s higher allocation to technology and lower allocation to telecoms and basic materials was positive for returns. The Company’s overweight exposure to industrials and consumer services detracted, although this was more than offset by strong stock selection. A lower allocation to financials was negative, however again, this was more than offset by accurate stock selection.

Zero exposure to utilities detracted as the sector saw a relief bounce following comments from the Spanish government that it would introduce exemptions to a policy that was originally expected to claw back about EUR2.6 billion in revenues from companies that profit from rising power prices.

The health care sector was the largest contributor to relative returns in October. Towards the end of the month, dental implant maker Straumann reported strong results, posting 30% organic revenue growth during the third quarter, driven by continued strong patient flow. Momentum remains strong across both their premium and their value ranges with strength coming from all geographies.

Novo Nordisk, the Danish pharmaceutical company focused on treating diabetes, published a very positive sales update ahead of its results in early November and raised its full year guidance, which reinforced our positive view on the long-term prospects of the company.

Chemicals distributor IMCD was the single largest contributor to returns during October. While the company had not reported yet, markets expected solid numbers as the environment for distribution businesses is extremely supportive given the supply constraints many industries are facing. On top of that, IMCD continues to execute strongly.

Strong contribution also came from the Company’s semiconductor-exposed names including ASMI, ASML and BE Semiconductor, all aiding returns. These companies benefited from strong order intake numbers, as current chip shortages fuel the need to increase capacity to meet demand. On a longer-term view, these companies benefit from the ongoing digitalisation of everyday life which translates into significant demand for semiconductor components. ASMI for example delivered a 4% revenue beat during Q3, a strong order intake and upgraded Q4 guidance. ASML also reported strong numbers during the month with Q3 net sales coming in at €5.4 billion which is a year-on-year increase of 32%. Finally, BE Semiconductor reported orders growing by 4.5% compared to the previous quarter.

Elsewhere, the Company benefited from a position in French luxury company Hermes. The group delivered an increase in Q3 sales, largely driven by a recovery in Europe while the Americas and Asia also contributed. In particular, the leather goods division grew strongly, not only compared to Q2 but also compared to last year and 2019 levels.

Negative contributions came from logistics giant DSV underperforming the market despite lack of stock specific news. Profit taking and market participants trying to figure out what a normalisation of the logistics industry might look like led to some weakness in the shares. Allegro also detracted with the market continuing to perceive increased competition from the likes of Amazon and Alipay entering Poland. We remain encouraged by data we are monitoring which shows no signs of market share loss that would warrant the share price reaction.

At the end of the period, the Company had a higher allocation than the reference index towards technology, industrials, consumer discretionary, health care and neutral energy.  The Company had an underweight allocation to financials, utilities, consumer staples, telecoms, real estate and basic materials.

Outlook

We see recent market strength persisting over the coming months, aided by better virus testing capabilities, a successful vaccine rollout and a resilient global consumer, alongside continued accommodative fiscal and monetary policy. This market recovery is unlikely to be equal across all sectors: some companies still lack pricing power and are unable to reinstate dividends; others, however, such as travel exposed stocks, could see a meaningfully brighter 2022. Inflation may be on the horizon, but rates will likely remain low. A period of prolonged negative real rates and higher nominal growth is needed to allow governments globally to work their way out of the post pandemic debt overhang. We see this as being a supportive backdrop for equities overall.

To discover more about the BlackRock Greater Europe Investment Trust click here. 

You might also enjoy reading  BlackRock Greater Europe Investment Trust NAV per share returned 49.4%, outperforming FTSE World Europe ex UK Index
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