Tilo Wannow, ODDO BHF Asset Management.
Investors who stuck with US technology stocks last year did not do too badly. This is because US companies (but not just them) are often locked into growth stories. So, should we leave European equity markets on the sidelines? Not necessarily. Europe also has innovative companies that contribute to global growth.
European companies are also positioned along the entire value chain, particularly in the field of artificial intelligence. These include IT service providers such as Capgemini and Accenture, which help companies implement and scale AI applications. In cloud computing, US companies such as Microsoft, Alphabet and Amazon provide the technological basis for AI applications. In contrast, European companies such as RELX, Wolters Kluwer and Experian are leading the way in data analytics. They provide the critical data and analytical tools that are essential to the efficient use of AI technologies. Infrastructure companies such as Schneider Electric also provide the stable technological basis that is necessary for the further development of AI technologies. Regardless of country of origin, it is important to select companies with a strong market position, strong innovativeness, and long-term growth potential.
European companies with a global footprint
In Europe, our investments focus on companies that have a strong global footprint, in addition to targeted positioning in artificial intelligence. A revenue distribution analysis shows that companies such as Schneider Electric, RELX and Wolters Kluwer have a broadly diversified revenue structure, which makes them more resilient to economic fluctuations. Schneider Electric, for example, generates 32% of its revenue in North America, 28% in Europe, and 40% in the rest of the world. RELX has a similarly strong global footprint, with 60% of its sales in North America, 20% in Europe, and 20% in the rest of the world. Wolters Kluwer is also broadly positioned, with 60% of its revenues in North America, 30% in Europe, and 10% in the rest of the world. These companies benefit from geographical diversification and stable demand in various markets.
It is also worth investing in insurance companies with long-term stability and attractive dividend yields. Based on forecasts for 2025, solid payouts can be expected from companies such as AXA with a forecast dividend yield of 6.7%, Allianz SE with 5.7%, and Zurich Insurance Group with 5.0%. The insurance sector has traditionally been a reliable asset class, generating stable returns even in times of economic uncertainty.
In addition, luxury and prestige brands have proven to be particularly resilient in recent years. Companies such as Louis Vuitton and Moët & Chandon enjoy strong brand loyalty and rising demand for high-quality premium products. The luxury market has proven to be a stable sector that performs robustly even in difficult economic times.
Focus on mid-caps
Another focus is on mid-cap companies, which feature a high return on capital. An analysis reveals high ROCE of companies such as Lifco AB, Diploma PLC and IMCD NV, at 20.0%, 17.5% and 16.2%, respectively. Mid-caps often offer above-average growth potential, as they can react flexibly to market changes and feature specialised business models.
The ODDO BHF AM’s European investment strategy is therefore based on a balanced mix of companies with global footprints, stable business models and high profitability. Their targeted selection makes possible a sustainable portfolio allocation that promises long-term growth and stable returns. ODDO BHF AM take into account both macroeconomic and market-specific risks to ensure a robust and sustainable investment strategy.
