Bellevue Entrepreneur Europe Small

European SMIDcaps, as measured by the MSCI Europe Small Cap ex-UK, declined by 0.3% in November, underperforming European large caps (SXXR +1.0%). Global markets were volatile. Early optimism around progress toward ending the 43-day US government shutdown was tempered by concerns about the monetization trajectory of large AI-infrastructure investments and continued cryptocurrency declines. Sentiment shifted following dovish remarks from the NY Fed President John Williams, noting further labor-market softening.Geopolitical developments also remained in focus, with renewed discussion of a potential Ukraine–Russia “peace deal,” though significant differences on key territorial concessions, have raised doubts about the likelihood of a near-term agreement. The eurozone’s Composite PMI rose to 52.8 in November, led by a strong services sector (53.6), while manufacturing eased slightly to 49.6. In terms of sectors, Materials (+3.1%), Utilities (+2.5%) and Financials (+2.3%) performed best while Communication Services (-5.0%), Information Technology (-2.8%) and Healthcare (-1.7%) lagged the most.

Against this backdrop, the Fund decreased by 0.9%, underperforming its benchmark by 63bp, mainly driven by its sector bias. Ytd the Fund is up 22.5%, outperforming its benchmark by 616bp.

Top detractors were Montana Aerospace (-22.8%), Alzchem (-22.0%) and Invisio (-14.0%). Montana lowered its 2026 revenue and EBITDA guidance (>EUR 1bn and >EUR 185m) after the energy business sale and a more cautious view on OEM pull rates, though at 7.5x EV/EBITDA, the valuation remains attractive. Alzchem softened after strong Q3-driven gains in October, mainly due to profit-taking and sector derating related to potential Ukraine peace progress, but the outlook remains supported by accelerating growth, margin improvements and strong free cash flow. Invisio weakened despite a SEK 190 mn order, issuing a profit warning due to delayed Q3 deliveries. We remain constructive, expecting stronger order intake in Q4 and into 2026/27 driven by an expanded product portfolio.

Top performers were Bechtle (+21.0%), Cloetta (+11.1%) and El.En (+11.9%). Bechtle published strong Q3 results with a return to organic growth led by international operations. The reaffirmed FY guidance implies a sharp revenue acceleration, likely supported by rising German public-sector IT spending. Combined with strict cost control, this should drive ~20% profit growth in Q4 and set a solid base for next year. Cloetta delivered a strong Q3, with organic sales up 1.3% and EBIT up 9% as margins improved 110 bp to ~12% across both divisions. With a robust 2025 outlook, self-help measures in 2026 should further progress toward the 14% long-term margin target. Performance also enabled inclusion in the OMX Stockholm index. El.En reported steady Q3 results, with revenue up 1.4% and EBIT up 3.8%, supported by a 40 bp margin increase to 15%, driven by strong medical demand offsetting industrial softness. Solid cash generation lifted net cash to EUR 138 mn, offering strategic flexibility. FY guidance was reiterated, pointing to solid Q4 growth.

What to expect for Europe into 2026? Despite unforeseen and hefty external headwinds stemming from Trump’s tariffs and China’s aggressive market-share policy, Europe has offsetting ingredients at hand. Southern Europe has reformed and pulled itself out of a historical crisis displaying solid GDP growth. In the Eurozone inflation has returned to the 2% target, allowing the ECB to lower deposit rates to 2%. Lastly, despite the increasing impatience and incredulity surrounding the deployment of the German fiscal stimulus, we expect the government to ramp up spending and for it to increase markedly in 2026 and 2027. Private households could follow through with higher confidence and spending as this unfolds. Also in the face of adversity, Europe is trading more with neighbours and friends and Germany is now exporting more goods to Poland than to China. Europe is not a crowded trade. We continue to stock pick with valuation stringency in a high-quality portfolio, well diversified between local champions and global winners.