Stuart Mitchell, manager of the SWMC European Fund, has taken significant stakes in two well-known companies on the continent – Air-bus and Carrefour. Mitchell remains bullish on Europe-an equities and says the recovery has accelerated in recent months.
Stuart Mitchell, S.W. Mitchell Capital
The manager believes Airbus “has very significant upside”. “Airbus is a wonderful opportunity, with anxiety over the A380 bringing the share price down to an optimal buying point,” Mitchell says. “The A320, the narrow body jet, has great prospects, particularly with the low-cost airline group. We also have excitement around the launch of the A350, and the costs relating to the launch of the A350 dropping out of the profit and loss account. Of course there is also the signifi-cant benefit of euro weakness, which will go a long way to reducing the margin difference to Boeing.”
As for French hypermarket chain Carrefour, Mitchell says the share price does not price in the recovery currently underway. “Carrefour is a fascinating situation. It faced a similarly deflationary grocery market to what we have seen in the UK. Over the last 10 years, Carrefour’s return on capital has halved, ” Mitchell adds.
“Rival Leclerc has been very aggres-sive and taken 2-3% market share away from Carrefour, but now we see a stabilisation in the market. “This has come at the same time as we have had the effects from the restructuring introduced by the new chief executive. We have seen sales of non-core assets; a re-freshening of the hyper-market network – particularly in Brazil – and we have also had the introduction of click and collect. Organic growth is now beginning to recover, even in France.”