Top 10 European stocks backed by the world’s best fund managers

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European regulators and investors are leading the pack when it comes to sustainability. Over the past decade, this has encouraged the creation of many green champion companies in the region.

It’s no surprise, then, that sustainability is a key theme for many of the non-UK European stocks that are most popular with the world’s top fund managers.

Companies such as Sika, Schneider Electric and Veolia shape their businesses based on their ability to reduce their customers’ impact on the planet. Nestlé, which has faced heavy criticism in the past over the ethics of its marketing of infant formula in poor countries, has also made huge efforts to boost its sustainability credentials over the past decade.

Even oil company TotalEnergies, one of Europe’s top 10 stocks of elite executives, recently changed its name to emphasize its renewables business – though many activists are still unconvinced that it evolves quite quickly.

The tech darling of Europe’s top picks, ASML, also boasts sustainability credentials. Its lithography technology allows computer chips to become smaller and therefore more efficient. Along with smarter chip design, this reduces the impact on the planet of our growing data usage.

Consulting and outsourcing services companies are also popular with the elite managers we follow. Places in our list of 10 favorite European stocks have been taken by Capgemini and Teleperformance.

The Top 10 European stocks list was formed using our unique measure of elite managers’ collective conviction. The elite managers we follow represent around the top 5% in the world and all stocks are linked to at least one of our 18 Fix the future themes. Themes can be positive or negative for the investment case and do not influence the rankings, which are presented in alphabetical order.

ASML

Fix the future theme: Digital infrastructure

ASML played a central role in the exponential growth in computing power known as Moore’s Law. It has a huge competitive advantage in the field of lithography and is expected to remain essential in advancing huge advances in computing.

ASML’s lithography machines allow chipmakers to work at a seemingly impossible minute scale. As chips are miniaturized, computing power increases. The company’s fortunes are tied to the world’s growing thirst for data and the health of its relatively concentrated customer base among major chipmakers.

Lawrence Burns and Paulina Sliwinska, who own 13.2% of their Baillie Gifford International Concentrated Growth Equities fund in equities, are among the Dutch firm’s strongest supporters.

Read our in-depth dive into ASML here.

Axa

Fix the future theme: Emerging Prosperity

Axa occupies a leading position in certain important insurance markets. In addition to being the second largest insurer in Europe, it is the world leader in commercial insurance as well as health and social benefits. About four-fifths of its income comes from its P&C, health and provident insurance

The company has gone through a period of restructuring since 2016 to reduce and refocus financial risks. He is now looking to reap the rewards of those actions.

Thomas Sørensen, manager of the Nordea Invest European Stars fund, is a particularly convinced funder, with a 4.5% position in equities.

Capgemini

Fix the future theme: Digital infrastructure

Running a business that relies heavily on technology, or even just uses it, can be challenging, but Capgemini can help. The Paris-listed company does this by consulting clients on how to transform and manage technology resources.

With its 340,000 employees, Capgemini believes it can partner with almost any company to benefit it in one way or another. The main funders are Filipe Benzinho and Daniel Ling, who hold positions of 2.3% and 2% in the MFS Institutional International Equity and MassMutual Overseas funds which they manage together.

hexagon

Fix the future theme: virtual society

In two decades, Hexagon has grown from a sprawling conglomerate and Scandinavia’s largest importer of fresh tuna to a high-tech precision measurement, digitization and data company.

The Swedish company offers a wide range of solutions to a variety of industries. Its services include tools to help miners improve ore extraction, construction layout planning, and ground-penetrating radar to detect utilities.

Ken Hughes, manager of the Martin Currie International Sustainable Equity fund, is a big backer, holding a 6.6% position in stocks.

Nestle

Fix the future theme: New agricultural and food technologies

Nestlé is the world’s largest food company and owner of many of the biggest consumer staple brands, from the KitKat chocolate bar to Nespresso coffee pods.

One of the virtues of strong brands in an era of rapidly rising costs is their pricing power. As investors worry about whether this is enough to deal with the current scale of inflation, early signs from Nestlé have been broadly encouraging.

With sustainability becoming increasingly important to consumers, these issues have become an increasingly important consideration in promoting brands. Large companies have an advantage in advancing the sustainability agenda given their ability to use scale to monitor and influence supply chains as well as improve the efficiency of their own operations and the safety of their products. .

Nestlé occupies a dominant position in the Swiss stock market, representing more than a fifth of its size. This is reflected in Patrick Hasler’s 22.3% position in his Migros Bank Fonds Institutional SwissStock Sustainable fund, but the stock is also an important position for fund managers with a broader view. Ian Kirwan holds 5.7% of his Calvert International Equity fund in equities.

Schneider-Electric

Fix the future theme: Resource efficiency

For nearly two decades, Schneider has focused its business on offering green solutions to its customers in the building, infrastructure and industrial sectors. Its products and services help customers both electrify their operations and digitally monitor and manage performance to increase efficiency.

Increased regulatory and investor focus on sustainability is expected to increase Schneider’s market growth rates. The company is also placing more emphasis on services, software and consulting, which should improve margins and earnings quality.

Koen Bosquet is among Schneider’s most confident elite fund managers, holding 5.1% of his DPAM B Equities Euroland fund in equities. Read our in-depth dive into Schneider Electric here.

Sika

Fix the future theme: Resource efficiency

Swiss chemical company Sika offers products that improve the performance of roofs, floors, concrete, cement and waterproofing.

At the heart of the company’s philosophy, each new product launched must not only be more efficient, but also more durable. This last concern is increasingly seen as a competitive advantage and has helped build an impressive track record of margin gains.

Stefan Gries and Giles Rothbarth are big backers, holding 5.9% of their BlackRock Continental European fund in equities. Read our deep dive on Sika here.

Teleperformance

Fix the future theme: virtual society

Whether you’re calling Apple tech support in a panic after dropping your iPhone in a puddle or yelling blue murder at the British Passport Office about delayed documents, chances are the center of calls to which you have been connected is managed by Teleperformance.

In addition to call centers, the Parisian company offers customer relations in many other media. Teleperformance also provides a range of outsourced back-office services ranging from visa processing to HR, and its services are increasingly using AI to help clients deal with the public.

Elite fund managers include Oliver Fritz and Matthias Born, who hold 5.8% of their Berenberg Eurozone Focus fund in equities.

TotalEnergies

Fix the future theme: Energy transition

The French superbig oil company TotalEnergies recently changed its name to highlight its efforts to clean up its operations.

While the company remains around 90% focused on fossil fuels and a target for environmental activists, there are signs that it is working hard to achieve its ambition to increase renewable capacity from 10GW to 100GW by the end of the decade. In May, he took a major step in that direction by announcing a $24 billion deal to buy half of Clearway, the fifth-largest renewable energy operator in the United States.

High-conviction backers include Lei Wang, who holds 4.9% of his Thornburg International Equity fund in stocks.

Veolia

Fix the future theme: Recycling and environmental repair

In early 2022, Veolia fought a deadly battle to take over rival Suez, involving asset sales, negotiations with competition authorities and threats of criminal charges against board members. The fight initially started in mid-2020 with news that Veolia was buying a nearly 30% stake in Suez from power company Engie.

The French water and waste management giant now has a new chief executive who is trying to focus the company on life after the deal. This means that integration must be combined with innovation as the company tries to play a leading role in solving sustainability issues related to water and waste.

Veolia’s elite investors include Noel O’Halloran, who holds 4.4% of his KBI Global Sustainable Infrastructure fund in equities.



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