JPMorgan European Discovery Trust plc (LON:JEDT) strong financial performance over 12 months continues to underline the attractiveness of this investment trust. The trust’s share price and NAV has grown 21.09% and 17.37% respectively for the 1 year period to 31 August 2024.
Month in review
- The trust underperformed the benchmark over August.
- Positive contributors to relative returns included stock selection in real estate investment trusts and media.
- Detractors included stock selection in construction & materials and pharmaceuticals & biotechnology.
- At the stock level, our overweight in TAG Immobilien, a German real estate holder, contributed to performance following a strong trading update and reiteration of guidance.
- Our overweight position in CTS Eventim, an online ticketing company, also contributed positively to our performance following the strong results released for the second quarter.
- Our overweight position in Aker Solutions, an energy services and equipment company, detracted from performance. We believe this was due to profit-taking following strong results, as well as weak Brent oil pricing during the period, which may have led to lower market expectations of capital expenditure.
- Our overweight position in Bilfinger, an industrial services provider, also detracted from performance due to what we believe was profit-taking following strong results.
Looking ahead
- An improved nominal growth outlook has historically translated to stronger corporate earnings. Earnings growth expectations for 2024 have seen steady improvement since late 2023.
- Europe’s manufacturing sector is recovering, and potential rate cuts by the European Central Bank could provide relief. Fiscal policies may boost demand, especially in green energy and defence spending, offering more upside potential compared to the US.
- European equities trade on an extreme discount to US equities. That discount has grown following strong 2023 technology-led gains in the US. This argument may not be new to prospective investors, but the European equity market currently can offer comparable levels of quality and growth potential.
JPMorgan European Discovery Trust plc (LON:JEDT) aims to provide capital growth from a diversified portfolio of smaller European companies (excluding the United Kingdom).
