Bellevue Entrepreneur Europe Small

European SMID caps, as measured by the MSCI Europe ex UK Small Cap Index, rose 1.9% in July, extending their outperformance over European large caps (Stoxx Europe 600; +1.0%) for a fifth consecutive month. The EU’s preliminary agreement with the US ahead of the August 1 tariff deadline helped reduce immediate trade-related uncertainties and supported market sentiment. While both the Fed and the ECB held rates steady in July, market expectations of a US rate cut increased. The eurozone’s Composite PMI rose to 51 from 50.6, indicating continued expansion across both manufacturing and services. In terms of sectors, industrials (+5.8%), energy (+4.5%), and financials (+4.4%) performed best, while technology (–4.5%), real estate (–2.1%), and materials (–2.1%) lagged the most.

Against this backdrop, the fund returned 2.9%, outperforming its benchmark by 105 bps. The fund is up 21.7% ytd, outperforming its benchmark by 596 bps.

The top detractors for the month were Fuchs (–14.1%), Carl Zeiss Meditec (–14.7%), and Cloetta (–7.2%). Fuchs disappointed the market by lowering its FY 2025 outlook. H1 delivered very good growth in Asia, with Europe stable, but the US disappointed from June onward, prompting the company to downgrade guidance. Fuchs is very well positioned as a globally diversified local-for-local business. An improving European environment will help, especially in Germany, where Fuchs generates 20% of its revenues. Carl Zeiss Meditec continues to face headwinds from subdued refractive volumes in China, FX pressure, and potential US tariffs. However, strong momentum from recent product launches and efficiency gains are helping to offset these cyclical challenges and support its recovery. Cloetta reported strong Q2 2025 results, with 7% like-for-like revenue growth and a 26 bp improvement in its EBIT margin to 11.5%. Despite this solid performance, the company prudently reiterated its full-year guidance, which led to some profit-taking given the stock’s 29% ytd gain.

The top performers for the month were Nordex (+28.4%), Wärtsilä (+21.0%), and Swissquote (+21.2%). Nordex delivered another set of strong results, marked by an 83% increase in orders, sustained notably by the high level of wind farm auctions in Germany. Meanwhile, its EBITDA margin continued to rise, underpinned by an improving gross margin and operating costs that are well under control, giving further credit to the company’s mid-term targets. For the Finnish engine specialist Wärtsilä, the gas power super cycle is starting to materialize. Overall orders grew 10%, beating consensus by 18%. Power plant orders grew 303% yoy in Q2, and the company announced its first US data center order. This confirms our positive view on the booming market for gas power, both in baseload and balancing. For Swissquote, trading activity statistics were strong in April and May, with June seeing some normalization at relatively high levels. Crypto volumes are also expected to be high, which could prompt Swissquote to raise its guidance mid-August after the publication of its H1 results.

While a 15% tariff on US imports from the EU is not good news per se, subjectively it seems the lesser evil. Exporters in Europe will take a hit, but as Gavekal Research commented in their «chart of the week,» the broader European domestic economy will mitigate the shock. Notably, a recovery in bank lending across the eurozone is becoming visible, thanks to the ECB’s interest rate cuts. On another topic, the Q2 reporting season is well underway, with 80% of companies having reported. There are plenty of traps out there, from USD weakness to the tariff-induced activity paralysis, but all in all European companies managed rather well, with the market displaying minimal tolerance for weak results (Renault, Puma, Novo, etc.). Finally (and out of pure personal interest), we leave you with a recent comment from J.P. Morgan: «SMID PMs should deliver more alpha than their large-cap peers for the foreseeable future (as has been the case over the last decade), given our view that SMID remains an asset class that is better suited than large caps for active management. This is, in part, due to the fact that SMID caps are less exposed to passive flows, which are increasing the volatility of large caps, worsening their risk-adjusted returns.»