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What has Richard Pease bought & sold recently?

What has Richard Pease bought & sold recently?

Henderson European Growth manager Richard Pease says he ‘would not race to go into Europe’ at current valuations.

‘I would say it is quite hard work to see an old or new company and say “this is fantastic”. You really have to analyse it now. It is not easy to find bargains, so you have got to buy things that aren’t looking their prettiest at this very moment.’

Pease cites mining equipment manufacturer Atlas Copco as an example of a stock he has been buying. He notes that although it has not experienced much growth over the past three years due to concerns about Chinese spending on resources, revenues from service contracts have proved robust.

Pease also highlights MTU Aerospace as a similar stock, for which he expects to see strong revenue growth coming through in two years’ time. ‘I have ended up with these sorts of things rather than a bank, utility or extreme cyclical,’ he said.

The Citywire + rated manager believes companies that operate in a niche, have sensible management and are cash generative will continue to outperform over the long term.

‘It will be bumpy. I think it has been too easy, but having said that, the direction of travel over the next three years will be positive,’ he said.

Pease targets companies that have defendable niches; operate in consolidating industries where there are higher barriers to entry; families or founders have significant stakes; or those with exposure to structural and emerging market growth.

The fund manager, who has traditionally avoided banks, took a recent position in Nordea Bank in his Henderson European Special Situations fund. It now stands as a top 10 stock. Pease was tempted into the company after the board was replaced, barring one person.

‘We think Nordea looks interesting on that basis because the dividend yield is increasing all the time and they are making better returns on their equity,’ he said.

It is a move that has so far paid off, Pease noted. ‘We took a 3.5% position in Nordea, which is up 10%.’

He also remains positive on his holdings in fragrance producers Givaudan and Symrise.

On ‘cash cow’ Givaudan, he explained that ‘to make something taste and smell good costs 1%’ and this is an investment that large good companies such as Nestlé are willing to make to maintain their reputations.

‘There are very real barriers to entry in that business. The emerging market story is catching up but in the mature market, it is about healthier eating. We want organic stuff and actually it is quite technically clever to achieve these things,’ he said.

‘You can see quite a sensible long-term growth in the mature market and emerging markets for a very long time. I can’t see it stopping any time soon. We are very happy as long-term shareholders.’

Global healthcare company Novo Nordisk gives him access to consumption trends and healthcare growth in emerging markets. Pease refers to it as a ‘bit of a play on the Chinese getting fat’ through Novo Nordisk’s diabetes products.

Although he acknowledges long-term holding Schindler, which manufactures elevators, has ‘missed the Chinese boat’, he says it is still a ‘good potential margin story’.

Lubricant maker Fuchs Petrolub and Kerry, which supplies food and beverage ingredients, also remain top picks.

Over the three years to the of December, the Henderson European Growth fund has posted a 26.2% return versus a 25.8% rise by the FTSE World Europe ex UK index over the same period, according to Lipper.

Meanwhile, Pease’s European Special Situations fund is up 29.2% versus the benchmark over the same timeframe.

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