Are European stocks coming back into favour? After years of underperformance, many of the continent’s companies appear undervalued when compared to their historical prices and US counterparts. Investment manager Stephen Paice suggests that a group of growth-focused stocks could be among the biggest winners if sentiment shifts, and he identifies a handful of places they are thriving.

Background

Stephen Paice is a partner in Baillie Gifford, our Head of European Equities, an investment manager on the Baillie Gifford Growth Trust and European Fund, and a member of our International All Cap Portfolio Construction Group.

In this episode of Short Briefings…, he explores why European stocks have been trading at levels that make them appear historically cheap, what might cause opinion to turn, and how that relates to his pursuit of long-term exceptional growth.

Topics discussed include why some companies are more resilient than others to trade tariffs and other price pressures, changing attitudes to regulation, and the importance of culture.

Stephen also spotlights four categories of growth companies he believes offer huge promise:

• the biological revolution: firms pioneering new treatments thanks to technological advances and deeper scientific understanding, with a focus on Novo Nordisk, Lonza and Camurus
• dominant digital platforms: businesses carving out leading positions in niche markets, with special mention of Spotify and Adyen
• semiconductors: companies fulfilling critical roles in the computer chip supply chain, including ASML and ASM International
• luxury goods: companies deriving powerful advantages by bringing historic and prestigious brands under the same roof, including LVMH and Richemont

Resources

Future stocks: our best ideas in Europe

Europe’s hidden tech titans

Benjamin Labatut: The Maniac

Gary Klein: Seeing What Others Don’t

Paul Kalanithi: When Breath Becomes Air

Richard Thomson: Apocalypse Roulette

Companies mentioned include

Adyen

ASM International

ASML

Camurus

Lonza

LVMH

Novo Nordisk

Richemont

Schibsted Marketplaces

Spotify

Timecodes

00:00  Introduction

01:45  From games of chance to European equities

03:30  The valuation opportunity

04:35  Addressing uncertainty and political instability

06:35  President Trump’s trade tariffs

08:30  Regulation and innovation

10:45  Our long-term growth investment philosophy

13:00  The case for Novo Nordisk

14:35  Tackling Wegovy’s muscle mass loss

15:25  Lonza’s growing market for biologics

16:50  Camurus’s FluidCrystal technology

18:05  Dominant digital platforms with network effects

19:40  Spotify chief executive Daniel Ek’s focus on customers

21:55  The importance of Adyen’s culture and leadership

24:40  ASML and ASM International’s semiconductor tools

27:25  Luxury conglomerates LVMH and Richemont

30:00  The advantage of ‘family involved’ companies

31:10  Being patient and putting up with volatility

31:55  Book picks

32:55  Spotting inconsistencies