France’s Best Investors Say Stocks to GainAdria Cimino
The French investors whose funds posted the biggest returns last year, doubling gains made by a regional benchmark, will remain optimistic about equities this year even if the euro-area economy continues to contract.
Armin Zinser of Societe de Gestion Prevoir, which oversees the equivalent of $1.34 billion in Paris, said he won’t change the strategy that enabled his fund to rally 34 percent last year. The 72 million-euro ($96 million) Prevoir Gestion Actions posted the second-best performance among funds based in France, excluding structured, indexed and specialized investments, according to data compiled by Bloomberg. The benchmark Euro Stoxx Index advanced 16 percent in 2012.
“I invest in companies that make products that we will always need no matter what happens tomorrow,” Zinser, who has held Nestle SA shares throughout his 30-year career, said in a telephone interview. “With the economy, we have the sword of Damocles over our heads. I don’t think the macro environment will be easier. But I’m the sort that plants a tree today even if I think the world is ending tomorrow.”
The European Central Bank last month predicted that the combined economy of the 17 nations in the euro area will shrink
0.3 percent this year. The central bank had forecast growth of
0.5 percent. ECB President Mario Draghi said on Jan. 10 that economic growth will slowly return in 2013 as the region’s bond markets stabilize.
Thomas Dhainaut, a manager at Sycomore Asset Management, posted the best performance by an investment domiciled in France as the sovereign-debt crisis eased. His 30-million euro Sycomore European Recovery fund surged 35 percent last year.
“We can post a good performance even when the economy isn’t doing too well,” Dhainaut said in a phone interview. “Last year proved that there are great stocks in Europe. Valuations remain very discounted.” The Paris-based firm oversees the equivalent of $2.1 billion.
The dividend yield on the Stoxx 600 is 2.1 percentage points greater than the yield on 10-year bunds, according to data compiled by Bloomberg.
The Stoxx Europe 600 Index rallied 20 percent from its low on June 4 through the end of 2012. The index is trading at 12.1 times estimated earnings, near its average price-to-earnings ratio over the last five years of 11.5, data compiled by Bloomberg show. The Stoxx 600 rose 14 percent last year. The benchmark index climbed 0.3 percent to 287.78 at the close of trading today.
Dhainaut’s fund focuses on recovery stories: companies that will restructure or rebound following a selloff. He bought shares in Telecom Italia SpA this month and recently purchased France Telecom SA stock.
“Telecom Italia was very leveraged and it’s Italian,” he said. “When there is tension in the debt market, a company that is in debt and is Italian is penalized.”
Dhainaut said brokerages will soon stop downgrading earnings for telecommunications operators. He said that companies would benefit from sharing infrastructure. Telecom Italia and France Telecom have discussed building a pan-European mobile-phone network with Competition Commissioner Joaquin Almunia, according to a Financial Times report on Jan. 8.
Stoxx 600 telecommunications shares fell 11 percent last year, the worst performance of 19 industry groups.
Last quarter, Dhainaut increased his investments in euro-area banks. He predicted that the industry will climb 15 percent over the next 12 months. Stoxx 600 bank shares advanced 23 percent in 2012 after dropping in the previous two years.
Zinser said he avoids companies that are partly owned by the state and he won’t buy shares such as PSA Peugeot Citroen just because they are inexpensive.
“I don’t believe in fallen angels,” he said. “It’s unthinkable to invest in Peugeot. I don’t believe in the company’s future.” Peugeot’s shares have slumped 78 percent over the past two years.
Zinser said he prefers luxury-goods companies. He holds stakes in LVMH Moet Hennessy Louis Vuitton SA, the owner of Marc Jacobs, and Christian Dior SA.
“No matter what happens, there will always be those who are richer than others,” he said. “In times of crisis, luxury does well.”