Last updated: 09:56 / Monday, 8 June 2015
Interview Ivan Bouillot, BLI

European Equities: A Balance Between Convictions and Protection

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European Equities: A Balance Between Convictions and Protection

For the last 10 years, Ivan Bouillot has been managing the European equities fund BL-Equities Europe. Let’s find out more about how fund manager Ivan Bouillot achieves this.

What are the specific characteristics of the BL-Equities Europe fund?

The strategy is concentrated on around 40 shares, which is small compared to other funds in the same category. They represent our strong investment convictions, both in terms of each share’s potential appreciation and the quality of the company.

Why the 40-share limit?

So we don’t spread ourselves too thinly and so we can follow each of our investments very closely. These 40 shares are selected from a universe that is itself limited and very stable over time, comprising around 150 shares altogether. This means we don’t have to constantly search through several thousand listed companies. From this sample of 150 stocks, we select those with the share prices we feel are attractive.

How do you select the companies? 

Our selection is based on our criteria of quality and understanding the business. We satisfy ourselves that the product or service offered by the company is different to that offered by its competitors. We avoid companies that do not offer added value as they are likely to operate in more competitive markets, usually have lower profit margins, and make a loss at the slightest hint of economic slowdown. In situations like these, the management and board of directors of these types of companies tend to waste a lot of time resolving all sorts of problems. Our preferred companies are those that have some protection against the advent of new competitors: for example ones with a brand in the consumer sector, specific know-how in manufacturing or a therapeutic specialisation in pharmaceuticals. We call these barriers to entry. We also like companies with the capacity to increase their dividends year-on-year as part of a policy of profit distribution to shareholders. Good examples are SKF in industrials and Unilever in foods. In addition, our investment choices are made with a 3 to 5 year horizon in order to take some of the markets’ day-to-day ups and downs out of the equation.

What other selection criteria do you use?

The fund aims to focus more on capital growth than yield. So we do not include companies with inherently low business growth, such as telecoms operators and utilities. We also steer clear of sectors or companies that are difficult to understand. And generally, we tend to favour manufacturers or intermediaries which supply high-added-value solutions over companies that sell their products directly to the end consumer, as the former are more profitable and less capital intensive. In the automotive sector, for example, we prefer to buy shares in a high-performance brake manufacturer, like the Italian company Brembo, rather than in the car manufacturer itself.

 

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