by Lucy Raitano
London’s financial scene has been buzzing with remarkable fluctuations in the stock prices of European companies around their earnings announcements. These swings have caught the attention of usually conservative, long-term investors, prompting them to dive into the unpredictable waves of market volatility.
According to Bank of America, European shares have witnessed near-record highs in volatility as the fourth-quarter earnings season reaches its midpoint. Tom Lemaigre, from the European Equities Team at Janus Henderson Investors, is one of several long-term players who have seen the current market conditions as a chance to seize opportunities.
Lemaigre, who co-manages an impressive portfolio of 7.5 billion euros ($7.8 billion), remarks, “When a stock seems to be deeply oversold, I can consider buying more. Conversely, if a stock is overbought, that’s my cue to take profits. It enables me to be strategic.” He goes on to explain his approach: “With a long view in mind and a knee-jerk 20% drop, that could be an ideal time to start or increase a position.”
A Reuters analysis in 2024 tied the surge in single-stock volatility to hedge funds adopting diverse trading strategies and a shifting market landscape. Bank of America’s recent data highlights this by showing that companies missing fourth-quarter projections face a sharp 2.6% drop on average, which is the largest since 2012. On the flip side, those outperforming expectations see a median rise of 1.7%, the second-highest ever. Barry Glavin from Amundi, the biggest asset manager in Europe, points out his team’s awareness of these strong market reactions. He notes, “As seasoned long-term investors with an eye for value, any opportunity to purchase stocks at a bargain—without altering our investment thesis—is worth taking.”
BIG MOVES, BOTH WAYS
So far, the quarterly reports from European companies have largely delivered optimistic news. Shares in Richemont, the French luxury behemoth, leaped by 16.4% on January 16—their largest in 17 years—after smashing expectations. Similarly, on their big days, Dutch payments company Adyen saw a 14.4% increase, while Germany’s Infineon enjoyed a 10% rise.
On the downside, Swiss bank UBS faced a 7% decline on its results day, as did Remy Cointreau, who saw a 7.4% drop. Global employment agency Randstad slipped 6.5%, and TUI, Europe’s foremost travel operator, tumbled over 10%.
LONG-TERM VIEW; SHORT-TERM OPPORTUNITIES
Amundi’s Glavin believes that though volatility can be daunting, it provides a golden opportunity for astute long-term managers to add value. Over at RBC BlueBay Asset Management, David Lambert, the head of European Equities, mentions that if a company seems fairly priced but experiences an exaggerated move following results, his team will pounce on these shares. “While we aren’t aggressive, we’ve noticed more chances to act as volatility has increased,” Lambert shares. Managing around C$7 billion ($4.9 billion), he emphasizes the need to stay adaptable: “Over the long term, having the agility to alter your positions as the market sways can be crucial… sometimes a stock might unexpectedly shoot up, and that’s when you lock in those gains.”
(Conversion rates: $1 equals 0.9570 euros; $1 equals 1.4201 Canadian dollars.)
(Reporting by Lucy Raitano; Editing by Amanda Cooper and Kirsten Donovan)
