French equity portfolio managers Vincent Durel (Fidelity) and Augustin Bloch-Lainé (Amplegest) have given their views and bets on the French equity universe to InvestmentEurope.
Durel (pictured), portfolio manager of the Fidelity France Fund, says three sectors particularly find themselves in his scope.
The first sector is that of construction. The manager has picked stocks such as Eiffage, BureauVeritas and Lafarge to play it.
“The buy-and-let trend is going back, infrastructure investments stand at their lowest point and the residential market regains momentum,” says Durel, who is also portfolio manager institutional Europe at Fidelity.
Another area Durel considers for the Fidelity France Fund is consumption. Christian Dior and L’Oreal have formed two of the 10 top active positions of the Fidelity France Fund in recent months.
“French households have gained some purchasing power. The fiscal pressure lowered and the oil price is kept down. Households’ savings remain at a high level and we have not seen a real rush within the consumption sector yet,” he argues.
The third market Durel closely monitors at the moment is these of telecoms.
“Experts say telecoms market will weigh €120bn in ten years, from €100bn today. Opportunities will emerge from these €20bn extra valuation. We currently keep a positive stance on Iliad. Investments to be done will increase their share on the French mobile phone market by 20-25% and Free’s own telecom network is to improve significantly. I have no concerns regarding Xavier Niel’s strategy,” Durel comments.
Bloch-Lainé, portfolio manager of Amplegest MidCaps and Amplegest PME funds, does not ride for a sector in particular but he outlines the digitalisation of businesses in France present some appealing opportunities.
“Digitalisation is in all French entrepreneurs and CEOs’ minds. IT teams are being built. The IT services sector is benefiting from the trend because a number of companies need advice on their digital transformation.
“Also the frontier between digital and physical is shrinking, we stress that digital retailers ever more open physical shops because studies have shown customers experiencing multichannel retailing (omnichannel) spend more money on average than those using only one channel.
“Attracting and keeping customers is becoming more and more complicated that is why businesses have to reinvent themselves and adapt the way the market their products/solutions,” Bloch-Lainé says.
SQLI and Solutions 30 have been two of the manager’s bets that have rewarded well so far.
Regarding Solutions 30, Bloch-Lainé says he is holding the stock since two years and that he does not have a price target on it but according to him, its growth seems potentially unlimited.
“Solutions 30’s business model relies on a network of electronic technicians that help thousands of clients at their homes. Fibre optic deployment in Europe and the installation of autonomous meters in France will drive the firm’s growth over the two coming years. But as the use of connected devices to networks rises, the growth will not stop there.”
Another story both Durel and Bloch-Lainé find attractive remains the M&A activity ongoing in the French mid-small cap equity space.
“M&A stories remain compelling. For instance, an important move in France has been the purchase of high-tech retailer Materiel.net by its competitor LDLC in 2015. This deal is offering more synergies, reducing competition and LDLC’s turnover will increase by around 50%,” Bloch-Lainé highlights.