The hunt for exceptions

By Alexander Darwall, Jupiter Asset Management

Added 21st September 2015

Alexander Darwall, head of European equities for Jupiter Asset Management, is an FE Alpha Manager who has typically outperformed his peer group over a long track record. He explains his approach and names some world class assets that he believes can prosper in a variety of economic environments.

The hunt for exceptions

In all regions of the world, if you look hard, you are likely to find companies that are doing something special. There are ‘world beaters’ among American companies, among Japanese companies and so forth. Europe is no different. There are around 3500 companies from which to choose. These include a few ‘world beaters’ and the job is to try and find them.

Seeking global models

Many companies in our portfolio are managing to generate earnings growth, however incremental, despite the difficult macro-economic background in the Eurozone. Investments aim to minimise exposure to the vagaries of macro-economic shifts. Rather than focus on currency swings and monetary policy, the fund instead looks more towards company-specific developments.  

The ability to roll out products and services across different regions without the need for too much costly, country-specific innovation, offers excellent scope for growth. Some of the companies in the healthcare sector in particular embody this proposition.

Fresenius SE is a German company that provides healthcare products and services for dialysis (a field in which it is a global leader), private hospitals and the medical care of patients at home. With a complex web of sales operations, it operates in over 100 countries and has more than 80 manufacturing facilities.

The bulk of sales derives from Europe and North America but nearly a fifth come from developing regions in Asia Pacific and Latin America. The company’s tremendous knowhow and experience puts it in a unique position to generate superior treatment outcomes in developed markets while in emerging markets, growth is directly linked to healthcare spending per capita.

Another holding well-positioned to take advantage of this trend is Novo Nordisk, which was recently granted approval by the US Food and Drug Administration for the reformatting of one of its existing drugs as an obesity treatment, Saxenda. The company reported 10% revenue growth in North America in the first half of 2015 and its new long-acting insulin has taken significant market share in Japan.

This is not to say that the global business model is a panacea: it’s certainly not fool-proof. If we look back at the past year, any number of European companies with global operations have suffered, whether due to their exposure to the slowdown in China, reduced demand for luxury goods or the fall in the price of oil.

`Alternative financials’

Amongst the biggest positive contributors to performance in the past twelve months were a collection of companies that can be described as 'alternative financials'. Within this group, Wirecard, Ingenico and Inmarsat are all, in different ways, “winners” from digital opportunities.

The first two are leaders in digital payments where there is a great deal of innovation and new solutions including mobile payments. Inmarsat is a world leader in mobile satellite services, providing data and voice connectivity. The company should benefit from increasing maritime and airline connectivity.

A second group within this sector includes Deutsche Boerse (stock exchange services), Leonteq (structured products) and Grenkeleasing (small ticket leasing). They are beneficiaries of the new regulatory and market challenges faced by the mainstream banks. Capital constraints, higher regulatory costs and antiquated cost bases are some of the problems faced by the mainstream banks. Yet demand for financial services – basic lending, for instance – remains. This represents a considerable opportunity for newer companies which are unencumbered by these legacy burdens.


The first half of 2015 was a period of great exuberance in European equity markets. Looking ahead, investors will ultimately require tangible evidence of an economic recovery in the Eurozone if the gains made by European equities are to be further extended. We are not economic forecasters, and our investment process does not rely on making macroeconomic calls. Rather, we remain focused on attempting to identify companies which can prosper in a variety of economic environments.

Alexander Darwall is head of European equities for Jupiter Asset Management. He manages the European Growth Fund, which gets a five crown rating from FE. He is also an FE Alpha Manager. FE data shows he has maintained a consistently high alpha score over a long track record in rising and falling markets.

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