The less restrictive regulatory environment for the European telecoms market makes it one of the best sectors to access in 2014, DNCA Finance’s Isaac Chebar has said.
The Citywire AAA-rated manager said telecom companies were the best contributor to the performance of the DNCA Invest Value Europe fund in 2014.
‘Telecom stocks paid off. The new regulation will give these companies more freedom to invest. Currently, they are under-investing in Europe compared to the US,’ he said.
The Paris-based manager, who co-runs the fund with Lucy Bonmartel, also believes these businesses still generate a lot of cash. ‘We are also very positive on consolidation in the sector, which might happen in the near future,’ he said.
Telecoms make up 11% of the portfolio and among his top positions are Italian group Telecom Italia, German firm Deutsche Telecom and French company Orange. ‘They are not delivering fantastic performances but are holding fairly well compared to a very volatile market,' he added.
Chebar's top stocks
Elsewhere in the fund, the manager cited the Luxembourg-based stainless steel producer Aperam as one of the top contributors to performance over the course of 2014. ‘The firm benefits from a strong presence in Brazil and the exposure to some Latin American countries.'
Chebar said the most recent management’s actions are evidently paying off. ‘Aperam is reducing its debt, the cash flow is improving and the valuation is quite cheap.’
Another strong contributor has been French industrial group Bouygues, which Chebar bought one year ago. ‘We purchased the stock at a very low price. This position has paid fairly well.’
Elsewhere, Chebar said he took profits from the pharmaceutical sector as it started to look quite expensive. ‘We made money and valuations went up. We still own 6% in the sector from 10% in the first half of the year.'
The main position he still has is in Swiss multinational Novartis. ‘They have good products in the pipeline for the next two to three years, especially in the cardiovascular field.’
‘We think the company now is streamlining as they have three franchises instead of the five they had before. Therefore they are going to be more focused than in the past,’ he added.
Over the past three years, the DNCA Invest Value Europe fund returned 44.74%, while the FTSE World Europe TR index rose 36.17%.