Argonautica

The Argonauts have returned to Greece, making our first investments in the country since 2006. Having lost €38bn from Greek government debt restructuring, the Greek banking sector has largely been recapitalised with new equity of €40bn1. This has also resulted in unprecedented large scale consolidation, with the four largest banks (Piraeus, Alpha, Eurobank and National Bank of Greece) now having a market share of 96%2 (compared to 55% pre-crisis)3. Not only do we think that there is an adequate margin…

With the Greek economy having regained its lost competitiveness upon joining the Euro; its current and fiscal account now in surplus and its government debt restructured; we think the emergence of Greece from recession should soon be officially confirmed. In view of Greece’s position at the epicentre of Eurozone stress, the Grecovery is likely to be the most important European economic and political event of 2014. The Greek economy has had six years of recession, with real GDP having contracted…

For much of the last five years it has been possible to be bullish on European equities without necessarily having the same enthusiasm about the European economy. We think that this narrative has now exhausted itself: extrapolation of emerging market demand is risky; the merits of quality companies able to compound their profits in an anaemic economic growth environment well recognised. With the European economy finally emerging from its double-dip recession we believe that the main opportunity in…

For the past three years there has been little economic or corporate profit growth in Europe. Only above average companies able to leverage their competitive advantages have been able to increase their profits. Given that equity valuations are very sensitive to growth assumptions, investing in higher quality companies has for the most part been a spectacular winning trade, particularly as the lack of value in other asset classes has justified multiple expansion. Although we are not ideologically…