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Julian Gibbs

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

particularly well.

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.

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