We are surprised by how the market is failing to grasp the impact of the latest mobile telephony technology standard, 5G. We see analysts repeatedly forced to increase earnings estimates on guidance from management, instead of accurately estimating for themselves the impact. We, as investors, have devoted considerable time trying to understand how the technology will change our everyday lives and the ways that business will operate.
With activity in Europe and the US coming to a standstill our key short term worry has been the resilience of our companies in these unprecedented times.
Firstly, and most importantly, I hope that this latest instalment in our series of insights from our conversations with company management teams, finds you and your families safe and in good health. All of us at S W Mitchell Capital are fine, are safely working from home with de minimis business interruption and all feel bizarrely energised by this terrible disruption to our daily routines.
As is always the case, January has been a month full of meetings with companies. This January the seven of us on the Investment Team have seen over 200 companies in 12 countries (France, Spain, Italy, Portugal, Norway, Sweden, Denmark, Finland, Germany, Austria, Switzerland and the UK). These have crossed the full range of sectors; both domestic and international companies; value and growth stories; large and small cap.
For decades there has been debate over whether the UK should be a part of the European Union (and, previously, the European Economic Community) – it was in order to put these debates to bed “once and for all” that David Cameron committed to and called a referendum on the UK’s membership of the EU in June 2016.
In this latest edition, Jamie and Brian explore their investment philosophy, the unique opportunity set offered by European Small Caps and the three elements of their investment process: meeting company management, analysing and assessing company cash flows and understanding catalysts for mis-pricings to be correct.
January is always a fantastic time to meet with companies before they go into their “quiet period” ahead of Full Year results. This January has been no exception and we, as an investment team, have seen some 210 companies. What follows is a tour of the current received wisdom regarding European markets with some interesting “soundbites” we have picked up, which in turn affect our current thinking…