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Fidelity takes stock of the business shifts in Europe

The radical differences bet- ween the top 10 stocks in Europe today and those of 20 years ago highlights the dangers of passive investing, warns Fidelity.

The five biggest stocks in the MSCI Europe excluding UK index 20 years ago no longer feature in the top 10. Only Swiss banking giant UBS appears in both top 10s, although Royal Dutch Shell, formerly the biggest stock in Europe would have kept that position if it had not consolidated its dual Amsterdam/London listing in London.

The change in the biggest companies also reflects significant shifts in the powerhouse industries of Europe over the past two decades. Chemicals, auto and engineering stocks made up half of the top 10 in 1985 while none makes the hit parade today. Pharmaceuticals, telecoms and IT hardware stocks have taken their place.

There have been geographical shifts, with Switzerland emerging as the dominant force in the list with four stocks. In 1985, Germany provided seven of the leading 10 stocks but has none today although it remains the dominant economy in Europe. Spain has two top 10 stocks – Banco Santander and Telefonica- France has the biggest company with oil giant Total and Finland has mobile phone firm Nokia.

Fidelity European is celebrating its 20th anniversary and fund manager Tim McCarron stresses the importance of finding the leading stocks of the future rather than tracking the current crop. He says: “The research makes clear the risks of allowing a benchmark to drive investment decisions. By definition, you fail to gain meaningful exposure to the growing companies until late in their development. This is one of the reasons why I let stockpicking determine my portfolio’s sector weightings, not the benchmark.”

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