Bellevue Entrepreneur Europe Small

European small and mid caps, as measured by the MSCI Europe Small Cap ex-UK, increased 1.8% in the month, outperforming the broader market (SXXR -0.7%, S&P 500 -0.7%, MSCI World +0.7%). April saw intense volatility across global markets following the US announcement of reciprocal tariffs, which triggered a sharp, rapid sell-off. The S&P 500 logged its fifth-worst two-day drop since WWII, while the 30-year Treasury yield briefly topped 5% and the VIX spiked above 50 - levels not seen since early Covid days. Sentiment improved after President Trump granted a 90-day delay for negotiations. The Eurozone Composite PMI edged down to 50.4 in April from 50.9 but marked a 4th consecutive month of expansion. The services sector continued to grow modestly, while the manufacturing sector saw a milder contraction. In term of sectors, utilities (+7.1%), real estate (+5.9%) and healthcare (+4.1%) performed best while energy (-4.8%), information technology (-0.4%) and consumer discretionary (-0.1%) lagged the most.

Against this backdrop, the fund returned 1.5%, underperforming its benchmark by 28 bps. At the end of April, the fund is up 6.0% ytd, outperforming its benchmark by 116 bps.

Top detractors in the month were Alten (-17.4%), Do&Co (-13.7%), and Arjo (-11.4%). Alten released a disappointing Q1 trading update with growth of -5.5%, impacted by several projects being cancelled toward month end. Earnings estimates took a 10% hit, implying that valuation contracted further. FCF yield is now above 10%, an all-time low. Do&Co was impacted by recent air traffic statistics showing a sharp drop of inbound flights. While partly due to Easter seasonality, this weak numbers confirmed recent cautious comments from US airlines. The final ramp up of the Iberia and BA contracts and further active tendering should however limit the impact of any air traffic slowdown. Arjo reported weaker than expected Q1 results. Negative FX impact on margins overshadowed the healthy revenue growth. Management reiterated its 2025 revenue growth guidance of 3-5% and has initiated cost measures as well as price increases to mitigate currency headwinds.
 
Top performers in the month were Nordex (+15.9%), Swissquote (+12.1%) and Andritz (+22%). Nordex released Q1 results marked by another strong performance on the margin front and a positive FCF. The company confirmed its guidance implying a 2025 EBITDA up more than 50%, while the 8% mid-term target looks increasingly within reach. Swissquote rebounded after releasing FY24 results and 2025 guidance end of March. The business model remains resilient and well diversified, fully unscathed by the tariff problematic, which is attractive in the current environment. The management is as always conservative in its forward guidance and we see Swissquote’s crypto exposure as a welcome revenue hedge. Andritz released solid Q1 results with strong order intake growth and resilient margins. Order intake was sharply better than expected with P&P 50% and Hydro 14%. Management was also reassuring regarding the direct impact of tariffs. We like the late-cyclical nature of the business and the resilient margins thanks to the asset light model with high recurring service revenues.

In the chaos induced by Trump’s “Liberation day” and the subsequent market roller coaster, one had the opportunity to be on the wrong side of trades a multitude of time during the past weeks. While the world debates if the flurry of presidential announcements follows a deeper strategy or a make-it-as-you-go narrative, the persistent weakness of the US dollar sends a clear message. We believe the S&P 500 is vulnerable to earnings downgrade and further multiple derating should follow. The rediscovery of the merits of diversification across currencies and geographies should continue to generate positive flows into Europe and favour  the continuous outperformance of European equities including Small & Mid caps. It should be noted that the neglected Small & Mid caps segment offers the greatest idiosyncratic diversification potential. We are sticking to our fundamental stock-picking strategy, which is diversified across local and global champions.