European companies, not economies, should be focus for investors

In the face of gloomy forecasts for Europe's GDP, investors can benefit from focusing on individual companies rather than economies, according to Sam Morse, Manager of the Fidelity European Fund.

Morse, who took over management of the fund on 1 January and spoke at the Fidelity Investment Forum 2010, says by investing in European companies investors are often gaining exposure to the global economy rather than just Europe.

He says: "The prospects for European companies can be good, even if economic prospects are sluggish. Stocks in Europe are lowly valued in absolute terms and are cheap compared to other regional markets.

"These days as much as 40% of European companies' revenues come from outside Europe and almost one quarter comes from emerging economies. Investors in Europe have access to some great multi-national companies competing successfully on the world stage but without some of the risks, such as corporate governance risks, that you can get when investing in more exotic markets."

Morse, who has a proven investment approach focussed on investing in quality companies that exhibit structural growth, says insulin producer NovoNordisk is a good example of a world-class European company gaining exposure to emerging markets.

He says: "NovoNordisk is a global leader with 50% market share and no significant patent risk unlike other pharma companies.  It's growing very nicely now but the long-term growth prospects are very exciting too.

"China is already a top five market for the company and, amazingly, they already have a 60% market share there.  As the incidence of diabetes continues to rise in China, NovoNordisk will experience good business growth for years to come."

The objective of the Fidelity European Fund is to achieve long term capital growth from a portfolio primarily made up of the shares of continental European companies. The portfolio is likely to have a bias towards medium-sized and smaller companies.

Almost 1,800 IFAs signed up for the Fidelity Investment Forum 2010 which took place from 25-29 of January in Edinburgh, London, Harrogate, Cheshire and the Midlands.