Q: Which are, in your opinion, the main permanent changes (if any) in the consumer behaviour derived from Covid-19? And how can investors benefit from them in terms of sectors or themes?

A: We think it is too soon to say if observable changes in consumers will be permanent. However, we believe the pandemic has greatly hastened the shift to online sales and may be redefining many leisure activities, even for something as small as the move to home-consumed cocktails in the US. We would mention adidas as one company that has led the way in utilising digitalisation to improve its business operations and sales, shifting from bricks and mortar retail partners to investing in its own website and apps to build a bigger moat between it and its competitors.


More generally we do think it likely that the pandemic will accelerate some long term secular growth trends. For example the growth of online banking has had a clear boost from people working from home, governments are bringing forward investments into the green economy as a way of stimulating activity, and leading companies are likely to accelerate plans to digitalise and automate business processes.

Secular growth opportunities*
Secular growth opportunities
Q: What is your view on the current debate about a possible resurgence of inflation? Would that alter the composition of your portfolio?
A: The sharp global economic slowdown has created enormous excess capacity in markets, creating a significant headwind to inflation. As long as consumers and businesses remain reluctant to borrow and spend we see a world where disinflationary forces remain dominant. This, along with higher debt burdens, implies a continuation of a low growth environment. However, that could change if governments embarked on large and sustained programmes of stimulus and urged central banks to remain subordinate to fiscal policy. We continued to seek great growth companies that have pricing power whatever the inflationary pressures in the economy.
Q: Great growth businesses are rare – what qualities do you seek a company?
A: We are always looking for companies which have a sustainable competitive advantages, pricing power and operate in areas of structural (as opposed to cyclical) growth and, just as importantly, companies that are able to reinvest their excess cash flows at a high rate of return. Such growth companies exist but they are not numerous. In our view, the stock market struggles to fully appreciate such businesses because of its inherent short-termism. Our approach seeks to exploit this market inefficiency. There are no simple screens available to do this, it’s a qualitative approach requiring a lot of painstaking analysis and research – talking to management, customers, competitors, building our own models etc.
Sources of sustainable competitive advantage*
Sources of sustainable competitive advantage*
Sources of sustainable advantage that yield long-term pricing power can be found in many areas: having brand loyalty, owning intellectual property rights, enjoying the virtuous benefits of a growing network, owning proprietary information, having an innovative product or even simply having scale in production and distribution. Ultimately we are looking for companies whose products are differentiated and valued by their customers.

We look for exposures to a wide range of structural growth trends. Demographics may mean more older people in mature western economies underpinning the demand for healthcare, but it also means a greater proportion of younger people in emerging market economies enjoying higher standards of living. Such trends underpin the long-term demand for cosmetics, branded global spirits and luxury goods. L’Oreal, Pernod Ricard and LVMH are three well known European growth companies benefitting from these trends. The increasing use of digitalisation is also allowing companies such as Edenred and Experian to grow their own ‘capital lite’ networks to dominate niches in employee corporate benefits and credit services. While demand for greater building energy efficiency drives increased usage of Kingspan’s insulation materials.
Q: In your investment and stock selection process, what is the most important qualitative trigger you consider in avoiding a company to be selected?
A: We endeavour to avoid companies whose products are undifferentiated and do not have sustainable pricing power. We aim to invest in growth companies that are industry champions today and will continue to be so for decades to come. Assuming a company has made it to our short list of potential candidates, our assessment of the quality of management and the board would be a major consideration.
Q: How do you embed ESG considerations in your investment process?
A: Identifying ESG risk factors is critical to understanding the long-term corporate competitiveness, that underpins our investment philosophy. We focus on sustainability of business models including material environment and social factors. We work closely with our ESG team both prior to investment and throughout our ownership of a company’s shares. We actively vote our shares and engage with management on key issues to encourage better stakeholder outcomes and we will not own positions where we have material concerns about long-term impact of ESG risks. We focus on succession planning, management incentivisation and alignment with shareholders. Neither ‘activists’ nor passive box tickers, our ongoing monitoring and meetings mean we have built up multi-year record of constructive engagement.
Q: What is the big argument in favour of European growth stocks in the next 12 months?
A: It is human nature to want to know what comes next. Nils Bohr, the Nobel prize winning physicist said with knowing frankness that ‘Prediction is very difficult, especially if it’s about the future.’ With similar candour we would answer your question by saying the big argument in favour of European growth stocks – whether for the next 12 months or the next 12 years – is that they are growth stocks. With Europe in a low growth, low inflation environment, such assets ought to be increasingly attractive.

Our investment approach leads us to invest in market leading businesses, whose products and services are valued far beyond European markets. We therefore tend to be materially overweight companies with global revenue exposures and are thus less dependent upon European economic activity.
Your Jupiter European Growth team:

Mark Nichols
Mark Heslop
Phil Macartney
Sohil Chotai
Nikisha Mistry
Please note
Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.

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