Market volatility reveals some good buying opportunities in Europe

“Volatility remains the prevailing theme for Europe’s equity markets”, say Roger Guy and Guillaume Rambourg, Managers of the Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund.

“European equities remain hostage to news flow as the market continues to be influenced by the latest release of economic news or rumour, from emergency Fed rate cuts to poor US data and banks or funds going under”.

“In this environment, we look to large caps with robust balance sheets and visible earnings to drive performance due to a flight to quality. These companies with international exposure, particularly to emerging markets, such as steel producer ArcelorMittal are proving to be very attractive investment candidates in volatile markets”. The Gartmore European Selected Opportunities Fund and the SICAV Continental European Fund are currently overweight in ArcelorMittal, relative to their benchmarks¹. The company has been a long term holding in both Funds.

The market volatility has also thrown up some attractive buying opportunities. Roger and Guillaume have added a tactical position in telephone company, Telefonica. The company trades at a discount relative to its peers on most market metrics including PE. Roger and Guillaume believe that the company will surprise by offering above sector average upside. Potential catalysts to this upside include renewed focus on turning around business in Germany and further increase in dividends and buybacks taking place. Telefonica’s successful wireless business in Latin America is an added attraction.

“Navigating the bear markets will be the greatest challenge this year however this volatility has thrown up some good opportunities. Exercising caution and maintaining a long-term perspective will be key to riding out the volatility” say Roger and Guillaume.