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European All Cap
The strategy was launched in June 2021 and invests in 30-45 companies that we consider to be the very best sustainability companies in Europe (including the UK).
Our European All Cap strategy invests in companies that we consider to be the very best sustainability companies in Europe. These businesses have strong and competitive franchises, exceptional people and distinctive cultures, and resilient financials. Individually and collectively they are solving difficult problems, meeting critical needs, and helping bring about a more sustainable future.
By focusing on the highest quality and best sustainability companies in Europe, we believe we can offer an exciting portfolio that stands out from the crowd.
Why invest in European companies?
World-leading sustainability companies
- Europe has a large listed universe, including world-leading health care, clean energy, manufacturing and IT companies
- Many of these companies have large and growing end-markets, including in many emerging economies, and a strong presence globally and locally
Exceptional people and cultures
- Many companies are run by outstanding management teams and are often controlled by long-term stewards – foundations, families and entrepreneurs
- Europe has a high concentration of companies with strong cultures, great franchises, and healthy balance sheets and financial characteristics
Sustainability tailwinds
- Social norms, policies and regulations are often favourable for companies advancing sustainable technologies and solutions
- European companies are known and respected for setting high standards
Strategy highlights: a focus on quality and sustainability
- Companies must contribute to sustainable development. Portfolio Explorer >
- We invest in high-quality companies with exceptional cultures, strong franchises and resilient financials. How we pick companies >
- We avoid companies linked to harmful activities and engage and vote for positive change. Our position on harmful products >
- Our approach is long-term, bottom-up, high conviction and benchmark agnostic
- We focus on capital preservation as well as capital growth – we define risk as the permanent loss of client capital
Latest insights
Quarterly updates
Strategy update: Q3 2024
European All Cap strategy update: 1 July - 30 September 2024
The performance of the portfolio looks to have stabilised following a relatively weak start to 2024. As market turbulence around the uncertainty of interest rates and geopolitics appears to settle, we remain excited by our holdings, many of which we believe are very attractively valued for their long-term growth potential.
Three new companies were added to the portfolio during the quarter. The first, ASML (Netherlands: Information Technology), is the global leader in lithography machines used to produce chips for semiconductors. Its culture is exceptional for its focus on engineering, with almost 40% of employees working in research and development with a budget of EUR4 billion in 2023.1
We also bought another Dutch-listed, but global-facing company, Wolters Kluwer (Netherlands: Industrials), which provides professional information, software and services to a diverse range of end markets. Most of Wolter Kluwer’s sales are recurring, with inflation-linked pricing. This enables stable cash flows and a consistent investment into new products, such as their CCH® Tagetik solution, which helps companies measure and report on their environmental performance.
The final company added to the portfolio was Knorr Bremse (Germany: Industrials), a leading provider of brakes for rail and commercial vehicles. A new CEO, Marc Llistosella, has brought a renewed focus on culture, operational efficiencies and additional growth opportunities around automation and digitalisation.
During the quarter, Bechtle (Germany: Information Technology) and Teqnion (Sweden: Industrials) were sold due to waning conviction in the sustainability and scalability of the franchise.
Two of the Swedish serial acquirers held in the strategy, Addtech (Sweden: Industrials) and Indutrade (Sweden: Industrials), both experienced strong earnings growth in the quarter. These businesses acquire niche product companies and allow them to run autonomously, using their cash flows to acquire more companies. Addtech and Indutrade both benefit from structural growth within renewable energy, automation and electrification, in which their components are used.
We visited both Addtech and Indutrade on a research trip to Stockholm during the quarter, as well as ten other companies. This included other portfolio holdings, such as access solutions provider Assa Abloy (Sweden: Industrials), the 153-year-old bank Handelsbanken (Sweden: Financials), the world’s leading manufacturer of air compressors Atlas Copco (Sweden: Industrials), and specialised software acquirer Vitec Software (Sweden: Information Technology).
The opportunity to meet with company management on their ‘home turf’ is invaluable; it is much easier to get a sense of how culture and people have shaped a company and its future return profile when sitting within their offices; or, in the case of Atlas Copco, 20 metres below their office in a test mine. We continue to find excellent investment ideas by focussing on the impact that outstanding people can have on businesses with strong franchises and resilient financials.
1 Source: ASML Annual Report 2023
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
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Strategy update: Q2 2024
European All Cap strategy update: 1 April - 30 June 2024
Following an improvement in the strategy’s performance in late 2023, the first half of 2024 has been relatively weak. Geopolitical and monetary policy uncertainty continue to weigh on markets, and the strategy was impacted by volatility from a small number of holdings.
This volatility brought opportunities to build positions in companies we believe are well-positioned for the long term, such as our IT services holdings, Endava (United States: Information Technology) and EPAM Systems (United States: Information Technology). Despite short-term pressure on customer budgets, the long-term opportunity of digitalisation remains an exciting area of growth for both companies.
We also added to a number of existing holdings, including Dino Polska (Poland: Consumer Staples), admiring their consistent execution in a fast-growing retail market, as well as companies with strong, diversified cash flows, such as Vitec Software (Sweden: Information Technology) and the global leader in locks, Assa Abloy (Sweden: Industrials).
In contrast, we exited several positions, including ALK-Abellò (Denmark: Health Care), Admiral (United Kingdom: Financials) and Spirax Group (United Kingdom: Industrials) due to valuation concerns and Alfen (Netherlands: Industrials) after issues around destocking, management change, and slowing end markets.
We initiated a new position in Ashtead Group (United Kingdom: Industrials), which rents construction and industrial equipment to a range of customers in the United States and further afield. Ashtead is stewarded by an excellent management team who have proven themselves adept at reinvesting cash flows into the business, as well as consolidating the highly fragmented market of equipment rental services through acquisition. The business model of equipment rental favours large-scale businesses with geographic reach, product breadth, and customer service excellence, for which we believe Ashtead is in a strong and still strengthening position. Ashtead should also benefit from strong sustainability opportunities (tailwinds), not only for the principle of maximising equipment life and ensuring responsible disposal, but also the use of leased assets in infrastructure investment across areas such as semiconductors, electric vehicles (EVs), and renewable energy.
A new position was also initiated in Air Liquide (France: Industrials), which supplies industrial gases such as oxygen, argon, hydrogen, and helium to a range of end markets, including healthcare, manufacturing, and electronics. The company is well-positioned within an oligopolistic, consolidated market; pricing is both rational and inflation-linked, and the products are often essential for their customers’ day-to-day operations. In addition to building on their century-old core business, Air Liquide are exploring new areas of growth in carbon capture and green hydrogen. It has invested in 200 megawatts of planned hydrolyser capacity in Normandy as part of their target to invest EUR8 billion to reduce emissions from hydrogen production by 20351.
Amid the volatility, it was pleasing to see signs of a recovery in one of the portfolio’s largest positions, Roche (Switzerland: Health Care). Following a long destocking cycle after the covid-19 pandemic, Roche is poised to capitalise on its market-leading diagnostics offering, which consists of 600 tests and is planned to grow by 40 new tests each year. Strong growth and cash flows from diagnostics support Roche’s long-term drug development and committed research & development (R&D) spending, which has built a 100-strong drug pipeline addressing unmet needs in areas as diverse as oncology, obesity, and multiple sclerosis.
Looking through short-term volatility and uncertainty, we remain confident in the long-term prospects of the portfolio and are excited by our exposure to high-quality companies with excellent sustainability tailwinds.
1 Source: Stewart Investors investment team and company data
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Strategy update: Q1 2024
European All Cap strategy update: 1 January - 31 March 2024
Following a stronger performance profile in the last quarter of 2023, the first quarter of 2024 has been relatively flat. The strategy portfolio performance was behind the MSCI AC Europe Index which was boosted in part by easing monetary policy and hopes for a soft economic landing.
During the quarter we took the opportunity to build up some of the newer positions we added in 2023, including Teqnion (Sweden: Industrials), the founder owned, serial acquirer of diverse businesses; Nexans (France: Industrials), the maker of electrical cabling used in renewable energy, and DiscoverIE (United Kingdom: Industrials), a manufacturer of niche electronics and manufacturing businesses. We also took the opportunity to add to our holding in Endava (United Kingdom: Information Technology) which suffered a sharp sell-off over market concerns about weaker discretionary spend from customers. While the company may face short-term uncertainty due to macro conditions, we feel confident backing its culture, stewardship and long-term growth potential.
Judges Scientific (United Kingdom: Industrials), the largest position in the strategy, continues to demonstrate resilient growth, and we remain excited about its potential, given it is still early on in its growth journey.
Valuation concerns and a need to manage position sizes led us to trim positions in Ringkjøbing Landbobank (Denmark: Financials), Nemetschek (Germany: Information Technology) and Adyen (Netherlands: Financials). Adyen had a particularly strong quarter, rising more than 145%1 since a period of weakness last year.
Over the course of the quarter, we exited Komerční banka (Czech Republic: Financials) to make room for two faster growing eastern European companies: Dino Polska (Poland: Consumer Staples), a vertically integrated, low-cost grocery retailer, and Allegro (Poland: Consumer Staples), Poland’s number one e-commerce platform that is expanding into Eastern Europe.
As ever, we continue to focus on long-term capital preservation as the bedrock of capital appreciation, and on ensuring the portfolio can weather most macro environments. Looking forward, we are excited by the quality, and diverse nature of the companies we hold, and their ability to contribute to, and benefit from, sustainable development.
1 Source: Factset
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Strategy update: Q4 2023
European All Cap strategy update: 1 October - 31 December 2023
Strong performance in Q4 propelled overall performance for the year convincingly into positive territory. Nonetheless 2023 will be remembered for market turbulence and fluctuations in the performance of the strategy.
The period from August through to October was especially difficult. Many macroeconomic worries that had weighed on equity markets at different times earlier in the year came to a head: monetary and fiscal policy tightness across European economies, the threat of recession and stagnation, falling real wages, declining household savings and spending, vulnerable housing markets, and slowing demand from China.
However, sentiment improved markedly in the final quarter as a consensus emerged that interest rates have peaked. Yields plummeted and valuations rose as markets celebrated a more benign inflation outlook and the possibility that the monetary policy tightening cycle is over, the industrial cycle turning, and demand recovering.
All but six of the 43 portfolio holdings rose over the quarter. Valuation concerns and a need to manage position sizes led us to trim positions in Admiral (United Kingdom: Financials), bioMérieux (France: Health Care), Atlas Copco (Sweden: Industrials), DHL Group (Germany: Industrials), and Infineon Technologies (Germany: Information Technology). We also sold the small remaining position in Rational (Germany: Industrials). The company has a limited range of products which we are concerned could face growing competitive and pricing pressures.
We made no new purchases, but took advantage of attractive valuation opportunities to increase shareholdings in EPAM Systems (United States: Information Technology), Jerónimo Martins (Portugal: Consumer Staples), Alfen (Netherlands: Industrials), Elisa (Finland: Communication Services), and Judges Scientific (United Kingdom: Industrials).
Over the course of the year our main concerns were to: 1) maintain and improve portfolio diversification and defensiveness; 2) maintain valuation discipline; and 3) take advantage of compelling valuation opportunities. In total we sold out of five holdings and introduced seven new names into the portfolio.
We replaced a handful of industrial companies because they became too expensive and/or their competitive positioning less convincing to us. They included Beijer Ref (Sweden: Industrials), Nibe Industrier (Sweden: Industrials), Tomra (Norway: Industrials), and Rational (mentioned previously). We also sold Diploma (United Kingdom: Industrials) to make room in the portfolio for DiscoverIE (United Kingdom: Industrials), a somewhat similar company to Diploma, although earlier in its evolution, and less expensive.
The four industrial companies we brought into the portfolio were Nexans (France: Industrials), Teqnion (Sweden: Industrials), Assa Abloy (Sweden: Industrials), and Addtech (Sweden: Industrials). All apart from Nexans have contributed positively to performance. The other two new positions were in EPAM Systems (mentioned previously) and Endava (United States: Information Technology). Both looked beaten up when we bought them, and both have strengthened since.
The most disappointing aspect of performance in 2023 was the damage done by the health care holdings, many of which were among the larger portfolio positions, precisely because we expect them to be resilient and steady compounders over the long term.
Three of the five largest detractors from performance were DiaSorin (Italy: Health Care), Roche (Switzerland: Health Care), and Carl Zeiss Meditec (Germany: Health Care). The other two big detractors were Alfen (Netherlands: Industrials) and Tecan (Switzerland: Health Care). We could have been less eager and slower adding to all five holdings as they fell.
The top five performance contributions in 2023 came from holdings in Inficon (Switzerland: Information Technology), Atlas Copco, DHL Group, Teqnion (all mentioned previously), and Spectris (United Kingdom: Information Technology); we reduced shareholdings in all except Teqnion and Spectris.
We have no ability to forecast markets, though it wouldn’t surprise us if 2024 presents a complex market environment with contradictory forces and signals. Optimism about equities may be running higher than it has for a couple of years, but markets have been swift to price in lower interest rates and some company valuations are already starting to look stretched. Easier financial conditions may be on the horizon, but money and credit remain tight in many economies. We may not yet have seen the full impacts of the tightening cycle we have been through. If economic activity fails to pick up, or contracts, company earnings could come under renewed pressure, and balance sheet strength and liquidity could be tested.
We enter 2024 with a portfolio of what we believe to be adaptable, high-quality, great sustainability companies, with consistent cash flow capabilities, and strong competitive positions in different market segments. The leaders of these companies understand the value of staying close to their customers. They steward their balance sheets carefully. They ensure their companies are as well placed to deal with emergent risks as they are to capitalise on long-term opportunities.
We will stay focused on the long-term, fundamental prospects of the companies we hold and those we are watching closely. Although we like the composition and shape of the portfolio, we will keep searching for companies that might improve overall portfolio risk-return characteristics. We will be vigilant about trimming holdings that become expensive and adding to those that present compelling valuations opportunities.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 0.5%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results.
Proxy voting
Proxy voting: Q3 2024
European All Cap proxy voting: 1 July - 30 September 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 101 resolutions from five companies to vote on. On behalf of clients, we voted against three resolutions.
We voted against remuneration motions at Ashtead Group as we were concerned about excesses in CEO salary. (two resolutions)
We voted against proposals related to amendments to articles (rules and regulations that govern the company's operations) at DiaSorin as the company did not provide enough information on the amendments. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q2 2024
European All Cap proxy voting: 1 April - 30 June 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 583 resolutions from 30 companies to vote on. On behalf of clients, we voted against 15 resolutions.
We voted against proposals regarding transaction of business at Alcon, Naturenergie, INFICON, SFS and Tecan as the companies provided insufficient detail on the proposal and we wish to avoid unfettered discretion. (five resolutions)
We voted against remuneration motions at Assa Abloy as we believe acquisitive businesses should incentivise management on returns as well as shares held. (two resolutions)
We voted against the appointment of the auditor at bioMérieux, EPAM Systems, Indutrade, SFS, Spirax Group and Unilever as they have been in place for over 10 years and the companies’ have given no information on intended rotation. We believe rotating an auditor on a relatively frequent basis (e.g. every 5-10 years) helps to ensure a fresh pair of eyes are examining the accounts, and follows best practice. (six resolutions)
We voted against remuneration motions at Indutrade due to concerns on direction of travel and compounding effects of CEO salary increases. (one resolution)
We voted against a shareholder proposal regarding board declassification at EPAM Systems as we do not deem it necessary for all directors to stand for election annually and believe this could destabilise the board by allowing excessive turnover. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q1 2024
European All Cap proxy voting: 1 January - 31 March 2024
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 206 resolutions from 9 companies to vote on. On behalf of clients, we voted against 10 resolutions.
We voted against an amendment to company articles at Belimo as we do not believe the registered office should be the sole place of jurisdiction for corporate disputes. We also voted against a transaction of other business which would grant unfettered discretion at Belimo and Sika. (three resolutions)
We voted against the appointment of the auditor at Roche as they have been in place for over 10 years. We believe rotating an auditor on a relatively frequent basis (e.g. every 5-10 years) helps to ensure a fresh pair of eyes are examining the accounts and follows best practice. We also voted against excessive executive renumeration. (six resolutions)
We voted against a shareholder proposal concerning a change of payment software at Handelsbanken as we believe the day-to-day operation of the business is best left up to the board and management. (one resolution)
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Proxy voting: Q4 2023
European All Cap Sustainability proxy voting: 1 October - 31 December 2023
Proxy voting by country of origin
Proxy voting by proposal category
During the quarter there were 28 resolutions from two companies to vote on. On behalf of clients, we didn't vote against any resolutions.
Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of the strategy shown above. Proxy voting chart numbers may not add to 100 due to rounding. SHP means: Shareholder Proposal.
Portfolio Explorer
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For illustrative purposes only. Reference to the names of example company names mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies. Companies mentioned herein may or may not form part of the holdings of Stewart Investors. Holdings are subject to change.
Certain statements, estimates, and projections in this document may be forward-looking statements. These forward-looking statements are based upon Stewart Investors’ current assumptions and beliefs, in light of currently available information, but involve known and unknown risks and uncertainties. Actual actions or results may differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements. There is no certainty that current conditions will last, and Stewart Investors undertakes no obligation to correct, revise or update information herein, whether as a result of new information, future events or otherwise.
Source: Stewart Investors investment team and company data. Securities mentioned are all investee companies* from representative Asia Pacific All Cap Strategy, Asia Pacific & Japan All Cap Strategy, Asia Pacific Leaders Strategy, European All Cap Strategy, European (ex UK) All Cap Strategy, Global Emerging Markets (ex China) Leaders Strategy, Global Emerging Markets Leaders Strategy, Global Emerging Markets All Cap Strategy, Indian Subcontinent All Cap Strategy, Worldwide All Cap Strategy and Worldwide Leaders Strategy accounts as at 30 September 2024. *Assets that the strategies may hold which an active decision has not been made, and sustainability assessment does not apply, include cash, cash equivalents, short-term holdings for the purpose of efficient portfolio management and holdings received as a result of mandatory corporate actions. Holdings of such assets will not appear on Portfolio Explorer.
The Stewart Investors supports the Sustainable Development Goals (SDGs). The full list of SDGs can be found on the United Nations website.
Source for Climate Solutions and impact figures: © 2014–2024 Project Drawdown (drawdown.org). Source for Human Development Pillars: Stewart Investors investment team.
Source for climate solutions and human development analysis and mapping: Stewart Investors investment team. Contributions are defined by the team as demonstrable contributions to any solution, either direct (directly attributable to products, services or practices provided by that company), or enabling (supported or made possible by products or technologies provided by that company).
Investment terms
View our list of investment terms to help you understand the terminology within this document.
First Sentier Investors (registration number 53236800B) and Stewart Investors (registration number 53310114W) are the business divisions of First Sentier Investors (Singapore).
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