European Opportunities Share Discussion Threads

[chinahere] 18/12/2022 20:22

Thanks. Another go.

[davebowler] 18/12/2022 17:47

htTPs://citywire.com/investment-trust-insider/news/darwall-dartmoor-and-a-camping-dispute-how-did-we-get-here/a2405044?re=104188&refea=252901

[davebowler] 18/12/2022 17:27

htTPs://citywire.com/investment-trust-insider/news/darwall-dartmoor-and-a-camping-dispute-how-did-we-get-here/a2405044?re=104188&refea=252901

[harry the haddock] 02/3/2022 17:34

thanks Rambutan - as you can tell ,it's one of those dependable stocks i very rarely check on!

[rambutan2] 03/2/2022 22:28

You needed to fish for a new ticker:

[harry the haddock] 03/2/2022 15:20

what's happened here? can't find any news, but price is unchanged in 6 weeks?

[edwardt] 23/9/2021 20:01

All on my own here. The trust starting to motor. Where is the herd? Still smarting about wire card no doubt. Discount remains wide - will probably take 2 years to close. Let's hope they find another darktrace or two...

[bottomfisher] 13/7/2021 10:45

Phillip Best, the senior independent director, has raised around £300,000 by selling close to 90% of his shares in JEO. He is due to retire at this year's AGM, so perhaps understandable. Nevertheless, hardly a resounding vote of confidence in the fund manager who has spent several million pounds over the last year buying over 900,000 shares.

[edwardt] 07/7/2021 15:58

starting to outperform again. time for some discount contraction...

[xtrmntr] 19/2/2021 19:10

When recently asked whether fraud was still rife in the modern corporate world, Terry Smith's answer was telling. "I think Wirecard (GER:WDI) answers that in a single word," he said.Not every star fund manager has the luxury of such observations. For Alexander Darwall, the nefarious practices that led to Wirecard's collapse have looked career threatening. Having at one point backed the stock to the tune of a 17 per cent allocation, Darwall still had a double-digit position in Wirecard via European Opportunities Trust (JEO) when auditor EY said it could not confirm the existence of €1.9bn (£1.67bn) in cash at the firm on 18 June 2020. This has dented the once top-performing trust's returns, as well as its reputation.Loyal fans have had the opportunity to buy in low since then. The discount to net asset value (NAV) at which the trust's shares trade widened out after the Wirecard bombshell and still sat at 10.5 per cent on 8 February. But big questions first need answering. Will the Wirecard episode ultimately be a one-off black mark against an otherwise illustrious track record or a sign of wider failings?We argue that the trust remains attractive – but only for investors who are happy with the risks of its high concentration approach. While the Wirecard scandal is highly unusual, it shines a light on the trust's real risks. Addressing concernsCriticisms of Darwall's approach must first be addressed. While the manager reduced his Wirecard position size some time before June 2020, he stuck with the company regardless of highly critical revelations by Financial Times' journalists and sustained concerns of short sellers. This points to specific weaknesses in his strategy.First, some would argue that Darwall and his team were happy to take the word of company's management and auditors rather than probing significantly deeper. Darwall was robust in his defence of Wirecard until the problems became undeniable. He acknowledged this himself in a recent presentation, saying "you can't rely on these people" of the accountants and regulators who dismissed Wirecard concerns. The investment team may also have become more sensitive to potential weaknesses in companies since. In September they appeared to sell out of Grenke (GER:GLJ) following a short attack on the stock, which remains controversial, although disclosures show they have rebuilt a small position since.A second criticism centres on position sizing. Darwall could have reduced his Wirecard position much more to offset the risks. The managers of a rival fund, Premier Miton European Opportunities (GB00BZ2K2M84), did exactly that. While the team trusted auditors' reassurances and held the stock, they limited the size of the position to reflect some concerns.European Opportunities Trust's board has responded to the issue of large position sizes in recent years. In early 2019 the board requested that no further shares should be added to the Wirecard position. A hard policy was then adopted that no position should be initiated or added to if it represented more than 10 per cent of total assets on the date of purchase. An expanded investment policy for the trust now states that the board will "pay particular attention to holdings which grow to represent more than 10 per cent of total assets".However, this is still a highly concentrated portfolio, meaning bigger risks and rewards. The trust's two biggest positions – Novo Nordisk (DEN:NOVO) and Experian (EXPN) – each sat near the 10 per cent mark at the end of January. The trust's top 10 holdings made up the majority of its assets.As one professional investor who holds the trust but did not want to be named puts it: "The stock size limit is helpful, but a 10 per cent holding that goes wrong can still do a lot of damage. But he has always run portfolios like this and running his winners has helped over time."Looking beyond Darwall's biggest mistakeThe latter half of this investor's statement, for us, outlines the enduring appeal of the fund. The manager did fall foul with Wirecard, but this was a sophisticated fraud that caught out auditors, regulators, analysts and some other fund managers. Yet Darwall's original approach, to take very high conviction stakes in companies with long-term, structural growth stories and run his winners, has otherwise proved highly successful over a long period. Importantly, the potential rewards have not lessened since the scandal. As the professional investor adds: "Simplistically, one bad stock call doesn't make him a bad fund manager, and the type of businesses he tends to buy don't really change over time."While Wirecard has tarnished Darwall's reputation the rewards of his approach still appeal, as long as investors understand that big bets bring equivalent risk.Darwall operates a high-conviction approach seen in several leading funds, from Lindsell Train's portfolios to Scottish Mortgage Investment Trust (SMT). Importantly, the stock picking itself has some defensive characteristics. Darwall favours businesses that have long-term structural growth stories, a level of pricing power, strong balance sheets and limited debt. In a recent presentation he added that the trust itself had low levels of debt given the current uncertainty in markets – 2 per cent of assets on 5 February, according to research company Morningstar.Similarly, he acknowledges the many macroeconomic threats to European economic growth, leading him to back companies with strong overseas revenues.This approach is reflected in the trust's long record of outperformance. In July, broker Stifel noted that 15 of the trust's holdings had been held continuously for three years or more, with 13 of them having outperformed.Beyond often boosting returns, the high concentration of the portfolio also gives investors an unusually clear view of what the team holds. The biggest holdings in the fund at the end of January included RELX (REL), French software company Dassault Systemes (FR:DSY1), Deutsche Börse (GER:DB1), asset manager Intermediate Capital (ICP), diagnostics specialist Biomerieux (FR:BIM), Grifols (SP:GRF), Genus (GNS) and Ubisoft Entertainment (FR:UBI).The trust's top 20 holdings, which recently included names such as ASML (NL:ASML), dubbed a "hidden tech gem" by Investors Chronicle, are disclosed once a month via stock market announcements.This trust certainly carries risks, and its mandate also complicates its place in portfolios. It has a quarter of its assets in UK stocks rather than a Europe ex-UK allocation, so can perhaps be best viewed as a standalone growth fund. Investors should also be aware of any crossover with other popular, highly concentrated funds: for example, LF Lindsell Train UK Equity (GB00BJFLM156) backs the likes of Relx and Experian.But for investors who understand the risks and are happy to keep an eye on this concentrated portfolio, there is no sign that Darwall has arrived at his Woodford moment yet. Buy. DB

[edwardt] 06/10/2020 15:42

fraud is hard to detect. we are hard wired to believe that humans are honest. how many spotted Madoff? 1investor. it happens, he is still a good manager. I am in.

[edwardt] 26/9/2020 16:36

Had a tough time. Still a class investor. Nice discount cushion to help now.

[chinahere] 16/9/2020 19:50

Yes, I agree. When it goes bad he has been quick to sell rather than just dribble.

[cordwainer] 16/9/2020 17:54

.. yet again booking a profit but this time exiting sooner rather than later.

[bramcych] 16/9/2020 11:25

Yet again another sell off of an overvalued hyped-up company (Grenke); yet another proof point of Darwall hubris.

[cordwainer] 29/8/2020 00:59

disappointing NAV performance this quarter, so not just a post-wirecard effect.

[chinahere] 26/6/2020 12:16

Wirecard is now at €1.85

€40 to get out was inspired (even if the original investment was clearly a mistake).

[chinahere] 25/6/2020 12:52

Wow, the complete sale was well timed after that bad news. Wirecard are apparently filing for bankruptcy now.

[chc15] 22/6/2020 14:35

Yeh he made a profit on the sale!

[chinahere] 22/6/2020 13:32

At least he sold quickly and got out around 40 Euros. It's only 16 euros now!

[bramcych] 22/6/2020 11:39

His reputation is toast, he fell for Wirecard's story completely. The history of asset managers who set up on their own is not good. Sell

[rooky4] 22/6/2020 09:20

Unfairly or not, Darwall will never regain his reputation after Wirecard.
And Devon is Darwall.

So it is time for brave board action - liquidate JEO, or move the mandate back to Jupiter. But don't just let the discount drift out for ever.

[chc15] 19/6/2020 23:56

Lol he took a big bet, if u didn't like it, u should have sold ages ago, not today. I'm ok with it, and I'm sure he will repair the damage in time. Prob a good buying opp.

[bramcych] 19/6/2020 21:59

Alexander Darwall = CIO Devon Investment Management = Hubris