Ryanair helps European fund take off

Ryanair (RYA.L) chief executive Michael O’Leary might not win the affections of the public, but the company’s balance sheet is winning over European fund managers.

Alexandra Hartmann, manager of the Fidelity Euro Blue Chip fund, is overweight the stock and says it has been a strong contributor in the portfolio since she bought it almost nine months ago.

‘Ryanair is in a very special situation as passenger traffic has only gone negative three times in recent decades and we see nowadays air travel is something completely different than it was before, as it’s cheap to travel by plane.

‘The investment is very much about cost control and having numbers at their finger tips. It has operational flexibility, disciplined capital expenditure and very good cash generation. It’s an affordable consumer good that many people can use’, she says.

Hartmann is a Citywire AA-rated manager having entered the ratings for the first time in May. She heads the Fidelity investment team in Frankfurt and took over the Euro Blue Chip fund following the departure of Fidelity International’s Graham Clapp at the end of 2006.

The fund has outperformed its benchmark over the past three and five years, with total returns of 18.24% over the past three years compared to the benchmark MSCI EMU index returns of 8.25%. However the fund has lost 12.2% over the past five years compared to a 20.57% drop in the MSCI EMU index total returns.

Its top holdings are in business management software firm SAP, banking group BNP Paribas, financial services group Allianz and healthcare groups Sanofi and Bayer.

Hartmann is underweight consumer goods. She explains: ‘It’s mainly because on a relative basis they are at their peak in terms of valuations so they are valued really as safe havens and are, looking at price to book and price to earnings, very expensive which will mean a reverse at some point.’

Although BNP Paribas, HSBC (HSBA.L) and a small holding in Spanish bank BBVA are all in the portfolio, Hartmann is also underweight European financials.  

Hartmann continues: ‘I think that the eurozone crisis will take quite a long time to resolve and we’ll have weak economic growth and bank deleveraging and as banks are really just a play on the economy, it’s quite an unattractive asset.

‘The next thing is Germany will be associated with the risks. We will have to pay one day any way, we just need to get the elections out of the way in a year’s time before it can be made much more obvious to the people on the street, and therefore investments in banks will be unattractive for quite a while.’