JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
Month in review
As of 31/07/2022
- The trust outperformed its benchmark in July.
- Positive contributors to relative returns included holding no position in banks and an overweight position in electronic & electrical equipment.
- Detractors included an overweight position in non-life insurance and an underweight position and stock selection in industrial engineering.
- At a stock level, an overweight position in Alten, the French R&D outsourcer, performed well over the month after the company reported exceptionally strong growth for the second quarter of 2022, combined with a robust acceptance of price increases and high staff utilisation.
- An overweight position in Nexans, the French cable manufacturer, performed strongly over the month after the company reported very high demand for its solutions across the business, with tendering activity particularly strong in its large projects business, boding well for future pricing and profit margins.
- On the other hand, an overweight position in Baloise, the Swiss insurance company, underperformed over the month after the company reported higher-than-expected natural catastrophe payouts, which, combined with lower-than-expected investment income, weighed on the results.
- An overweight position in Virbac, the French veterinary-focused pharmaceutical company, underperformed over the month after the company reported a sequential slowdown during the second quarter.
Looking ahead
As of 31/07/2022
- Despite widespread supply-chain issues, earnings growth was strong in 2021 as companies were able to pass on the cost increases to consumers. However, growth could slow as profit margins come under pressure from higher wages, elevated commodity prices and increasing borrowing costs.
- Concerns around inflation remain at the centre of market volatility and a meaningful decline in government spending relative to revenues are likely to reduce the aggregate demand within the economy. The risk is that if the economy slows too much, rather than just cooling, we could see a more meaningful and long-lasting recession.
- While the short-term outlook is both challenging and confusing, given the better valuations yielded by a painful first-half selloff in financial assets, we believe equity markets could now offer an attractive entry point to the long-term investor.
