Reply #10: Investors should keep faith with Europe

[EuroObserver]

LONDON (Reuters) - Fund managers are telling ISA investors to keep faith in European equities which they say are likely to rise on the back of M&A activity, energy stock strength and the EU convergence theme.

Last year was a good one for Europe with profits and dividends healthy and the stock market rising strongly.

Rob Burnett, manager of the Neptune European Opportunities fund, insisted the sector had real staying power and added that his fund had done well out of the oils sector despite it being a volatile ride. He is happy to stay invested there, but is far more stringent on his stock selection now. "We have been largely invested in oil services and refining stocks where there is a clearer earnings momentum," he said. "We are now even more geared towards companies that are best positioned to benefit from the oil sector rather than the producers themselves." He added: "We are still long-term believers in this sector but we are now focusing on companies carrying out seismic surveys, for instance drilling companies or French-listed engineer Technip which builds oil refineries."

Burnett said the four key themes driving the European market now were energy, EU convergence, income, and the "new world order." "With the EU convergence theme, we are looking for stocks like Austrian insurer Wiener Staedtische which has a large footprint in Eastern Europe, specifically the Ukraine and Romania," he said. "The prospects for real expansion are great."

The new world order concept, he argued, was part of a more recent investment philosophy. "The emphasis is on finding many European businesses that have a growth profile worldwide. For instance, economic growth in China has changed trading patterns across the world. And there are companies such as Scandinavian cranes-for-ports specialist Cargotech that have a very strong profile in Asia."

Burnett also said Europe was often overlooked when it came to good income prospects.

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