Germany is, more or less, the usual train in motion. On the other hand, emerging countries are disappointing. And the disappointment is all the more bitter given how high are expectations were. David Grazzini, manager of Kairos Partners’ KIS Small Cap fund reports back after a recent trip with stops in various European countries to hear from and discuss with local managers, top management of large companies and investors. “One of the biggest financial issues under debate relates to the BRICs: indeed, they have been disappointing across the board, at least in three out of four cases. The trend is even worse than expected and, while China persists in providing some satisfaction, Brazil is barely limping along. To participate in the country’s economy,” adds Grazzini, “you need a local base, but the only thing that could still attract foreign investment is currency devaluation.”
The scenario in Germany is completely different, as the country remains Europe’s locomotive even in these critical times. “Here, production has not stopped, to the contrary, if take the forklift market as an example, which reflects the trend in industrial production: the climate pending the elections was wait-and-see, with orders down 10% in the first nine months of 2013. Then Chancellor Merkel won… and orders took off again”.
These are individual stories that we must select carefully, taking a bottom-up approach and deeply exploring each company in which we invest. “It is no coincidence that the stock picking strategy for the Small Cap fund has worked particularly well at the start of 2014, which has been tumultuous for stock markets. What can we expect in 2014? Interesting generation of returns, just like we have seen up until now, since the Fund ended 2013 with performance of +6.5%”.