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TM CRUX European Special Situations Fund 2022 and the outlook for 2023



This year has seen a large rotation out of growth names on rising interest rates, cyclical companies have been out of favour on recession concerns, while energy stocks have rallied.  The stock market is struggling to predict the future profile of inflation and therefore interest rates, which has led to continuing volatility.  Despite this, the TM CRUX European Special Situations Fund has been relatively well insulated from the energy price and inflation rises exacerbated by the Ukraine war. The fund has exited some names with higher price/earnings ratios this year and we are seeing value emerging in the lower rated end of the market. Additionally, many industrial companies have successfully moved away from gas consumption, thus improving their prospects for this winter. 






We are positive on our portfolio holdings for 2023. Despite a struggling  economy, the European investment framework remains attractive – regional stability, stable corporate governance and many interesting companies that currently have very attractive valuations. Smurfit Kappa, for example, is on an estimated 8x earnings this year, yet is trading 25% down from January.

Our strategy continues to back strong, European-born global businesses. Many are still run by entrepreneurs who pursue accretive acquisitions and have ridden fairly resiliently through previous downturns, but are trading at significant discounts to history.

Additionally, we are positive about next year because the fund’s holdings have never had such strong balance sheets, particularly reassuring if Europe slides into a recession. Across the fund, many companies have net cash and trade at historically low earnings multiples.  





A key theme in the portfolio is banks. One holding is BAWAG Group which is well capitalised and has an incentivised, stock-owning CEO. It is a niche lender unencumbered by efforts to maintain a large market share and is projected to yield 8.5% next year. In the Nordics, a region whose well-run banking sector we highly regard, we are interested in Nordea, a bank with fairly high returns on equity and high dividends.

Another theme coming through in the portfolio is green efficiency. Holdings such as Bravida, a building efficiency improvement business, Aalberts, which creates mission-critical technologies for energy efficiency in buildings and infrastructure, and Schneider who specialise in digital automation and energy management have historically performed very well but are currently trading lower than last year. These stocks are slowly beginning to pick up and we anticipate them to do well in the future.

Microchip manufacturers are a third area of particular interest given the growing importance of digital technologies and increasing adoption of EV cars. STMicro and Infineon make niche analogue chips that for example measure light, heat and power. Both companies have large market shares and strong sales potential as more chips are needed for electric and autonomous cars as well as smarter industrial applications.  These companies are both trading on lowly valuations in our view.






This year has looked difficult on the surface, but the TM CRUX European Special Situations Fund has been fairly well insulated from energy price rises. Indeed, many of our holdings have extremely strong balance sheets and are well-prepared for any recession. Nonetheless, we are positive about 2023, especially regarding banks, ‘green efficiency’ stocks and microchip companies.  

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