The MainFirst Top European Ideas Funds team headed by Olgerd Eichler, Evy Bellet, Alexander Dominicus and Alexander Lippert remains true to their investment style, even in volatile and weak market phases. As a general principle, the fund is fully invested and pursues a disciplined investment approach. The aim is and remains to achieve long-term added value for investors through its investment decisions. The team is constantly on the lookout for new ideas and opportunities. These can be solid companies that perform better than average in operational terms by increasing efficiencies and gaining market share. Or even shares in companies that have been unfairly excluded from the focus of the broad investor base due to current market opinions and therefore have attractive valuations.
Achieving respectable and predictable profit growth is an ideal prerequisite for a revaluation on the stock market that can be expected in the future. This is often accompanied by a significant increase in valuation. In combination, this can lead over the years to extraordinary price gains or even to a multiplication of the investment. The core of the portfolio lies in the long-term participation in the success of undervalued companies with an outstanding business model, high growth potential and above-average profitability. Important criteria for the valuation are an excellent and above all conservative as well as reliable management which uses the shareholder capital entrusted to it profitably in an entrepreneurial and conscientious manner.
An intensive examination of potential investment candidates is essential. The more than 200 business contacts that the team makes every year also help in this. Due to the high demands placed on the quality of the business model and management, however, only a few new shares actually make it into the portfolio each year. The fund volume of almost 1.1 billion euros is spread over approximately 50 stocks. If the team is convinced of a company, they also like to buy heavily and take a larger position in the fund. The concentration of the fund is correspondingly high. The top 15 represent more than two thirds of the fund. The team spends even more time than on new ideas on the constant examination of the operational development of the existing portfolio companies. In order to be close to the companies at all times, there is a regular, intensive exchange with company representatives and board members as well as with analysts through personal meetings and telephone calls.
The macro level plays a role in this purely bottom-up approach only in the second instance. Especially in times such as these, market events and the welfare and woe of share prices are usually dominated by the macro perspective. The balancing discussion between the consequences of the uncertainty about the further development of the world economy and the consequences of an unprecedented expansive monetary policy overshadows all valuation and quality issues.
Hella is an example of an outstanding company that is keeping its course even in the difficult waters of the automotive industry. Hella is a niche company predominantly family-owned with a strong balance sheet and a highly innovative product portfolio. The company develops and produces lighting solutions and other electronic components such as sensors and radars for the automotive market, which will also remain relevant in electrically powered vehicles (EVs). Hella is already benefiting from long-term trends such as the hybridisation of the automobile and the introduction of LEDs in more and more vehicle classes. Sales growth is supported by the introduction of innovative new products. High investments in research and development lay the foundation for future organic growth. This also enables Hella to grow far above the average of the automotive industry, which gives it a relative advantage, even if the overall growth of the industry slows down. With a very good, prudent and reliable management and a still attractive valuation, the company is one of the top investments of the MainFirst Top European Ideas Fun.
Olgerd Eichler and his team also find worthwhile investment opportunities in the financial sector. The Austrian Bawag is one of the most efficient banks in Europe. With a recent cost-income ratio of 43 percent and a high dividend yield of over five percent, it is currently the largest position in the MainFirst Top European Ideas Fund. The rationalisation of the branch network and the improved profitability of recent acquisitions are currently opening up further optimisation potential. The outstanding Management Board team is strongly incentivised by a multi-year remuneration system. The extremely profitable bank with an enviable equity base is very inexpensive in terms of valuation and has not yet received adequate attention on the capital market.
Shares that have come out of the focus of market participants and certain segments that have been left behind are trading at historically favourable valuation multiples. Looking at company valuations in relation to turnover or book value, many cyclical stocks are already at levels that were last marked at the low point of the financial crisis a good ten years ago. The discrepancy between cheap, cyclical stocks and expensive, defensive stocks is enormous. In a market environment characterised by macroeconomic and monetary imponderables, long-term investors in particular have good opportunities to enter the market and participate in the price potential of first-class companies. It is precisely in such volatile and undifferentiated market phases that the greatest profits can be achieved in the long term.
With its investment strategy, the team has consistently generated attractive returns for investors over more than 10 years. They use all their skills and passion to keep it that way.