Conventional wisdom says the US is the only place to find world-beating companies while Europe has lots of ‘interesting’ niche businesses like specialist engineering and luxury goods companies.

The truth is Europe has dozens of companies which are at least on a par with if not well ahead of their US counterparts, and investment trust BlackRock Greater Europe (BRGE) owns many of them.

The trust’s top three holdings as at the end of March, which made up just under a quarter of the portfolio, were Danish drug maker Novo Nordisk (NOVO-B:CPH), French luxury goods giant LVMH (MOHF:FRA) and Dutch semiconductor equipment manufacturer ASML (ASML:AMS).

The rest of the portfolio is also built along ‘quality growth’ lines and includes luxury goods group  Hermes (RMS:FRA), chip maker STMicroelectronics (STM:FRA), iconic sports car manufacturer Ferrari (RACE:NYSE) and posh chocolatier Lindt & Sprungli (LISPE:SWX).

Thanks to its asset allocation – plenty of tech, luxury and healthcare and no direct exposure to banks – the trust had a good first quarter, posting a 14.2% increase in net asset value and a share price gain of 12.9% against an 8.6% rise for the FTSE World Europe ex-UK index.

The fundamentals for its main holdings remain positive: Novo Nordisk surprised the market with the strength of demand for its obesity drugs in the US, while LVMH and Hermes saw their revenues soar on Chinese demand for luxury goods.

At the same time, the economic outlook for Europe has materially improved over the last six months meaning its more domestic-facing holdings have also performed well.

‘Despite year-to-date gains, the set up for the European equity market remains favourable relative to developed market peers such as the US, and European equities are still under-owned and valuations remain attractive,’ say the managers.

European companies have much better balance sheets than in the past, having spent the decade since the financial crisis deleveraging themselves, and major stimulus programmes such as the Recovery Fund, Green Deal and the REPowerEU plan ‘can drive demand for years to come in areas such as infrastructure, automation, innovation in medicines, the shift to electric vehicles, digitisation or decarbonisation’, add the managers.

The trust has an ongoing charges of 0.98%, not particularly cheap, but given its long-term record of outperformance can be argued is fair for the value added by the team. The trust trades at a 4% discount to net asset value. 

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