Real money is made in the stockmarket by buying low and selling high. It
is always worth looking at the worst-performing markets to see whether
there is value.
Last year, the European technology markets were hit worst of all. Aberdeen
Euro technology lost 61 per cent of its value and some of the other
European smaller companies trusts, such as Invesco Perpetual European
smaller companies, lost up to 46 per cent.
The cause of this was a combination of a rapidly decelerating economy and
a succession of company profit warnings and falls in profits.
Nevertheless, over a three-year period, the average European smaller
companies fund shows returns of over 32 per cent against less than 19 per
cent for conventional European funds.
There are some bull points. Buyouts have been booming in Europe and there
has been a large amount of merger and acquisition activity. While the euro
is forecast by most fund managers to be stronger against the pound over the
next year, it is also likely that interest rate cuts will come later this
year. This will be of great benefit to smaller companies, which have
historically outperformed bigger stocks in times of falling interest rates.
Stockpicking is, of course, of vital importance. Over the medium term,
Henderson European smaller companies, M&G European smaller companies and
Fleming Select Continental European smaller companies funds have performed
For those investors who wish to speculate, I have a hunch that Aberdeen
Euro technology may be the best performer of all over the next three years,
as technology stocks in Europe have been hit even harder than those in the
UK and US.