How to Discover Quality Growth Stocks Across Europe

Thorsten: The AllianceBernstein European Growth Equity Portfolio invests in European equities and is an unconstrained, high-conviction portfolio driven by fundamental research and bottom-up stockpicking. Taking a long-term approach to investing, the team seeks to identify high-quality companies benefiting from structural growth while paying attention to valuations. The Portfolio invests in a range of 40–60 holdings in both medium- and large-capitalization companies. 

Thorsten: Our long-established investment process has been built around a disciplined and distinct approach to investing in European equities. As a team, we seek to invest with a long-term (5–10 year) mindset through consistent stock selection driven by our proprietary fundamental research. We aim to identify high-quality companies with strong, competitive business models and above-average structural earnings and cash-flow growth potential that the market has not yet fully acknowledged. With the mindset of a business owner, we seek to hold these companies for the long term, which allows us to maximize the compounding effect of these earnings and cash flows over extended periods.

Thorsten: Our investment approach is built upon our conviction that companies benefiting from structural growth have the ability to generate long-term returns for investors in an uncertain world. Structural growth trends tend to be less dependent upon economic growth and may be driven by secular growth drivers such as digitalisation, automation and demographics. We actively avoid companies which we believe are dependent upon cyclical growth, where performance tends to be more sensitive to macroeconomic events and the market cycle.

Thorsten: After a period of domination by the so-called “Magnificent 7” stocks, which have driven US equity markets to outperform Europe and Asia, we think Europe offers promising opportunities for the selective growth investor. European equities have always been seen as trading at a valuation discount to US equities. But if we take a closer look at the European market, we find that Europe is home to companies with strong global business models that are market leaders around the world. In fact, there are plenty of leading-edge technology companies in Europe that are managing to deliver long-term growth even in times of lower global economic growth, owing to their strong and resilient business models.

Thorsten: Within Europe, markets have proven sensitive to global trends and macro shocks. Despite the potential for interest-rate cuts later this year, AB believes that structural inflation and interest rates are likely to remain higher for longer and that actively managed equity portfolios will therefore become more important than ever. We firmly believe that earnings growth drives long-term company stock performance. Following a period of unprecedented market concentration in US stocks, we expect to see markets focus on a wider pool of structurally growing, high-quality companies. This is likely to lead to better conditions for skilled active managers to outperform, in our view. Fundamental research and stockpicking are key to driving long-term equity returns within our portfolios.

Thorsten: I have led the European Growth team since 2009 and have a total of more than 25 years of investment experience. I am supported by a team of four, including Robert Hofmann, Marcus Morris-Eyton, Darina Valkova and Nicolas Gonçalves, who have an average investment experience of 16 years. The team benefits additionally from the deep, shared global resources at AB, and we can draw on expert in-house resources including Data Science, Responsible Investing, Risk Oversight and Trading. All of us have spent most of our careers as investors on the Strategy and strive to generate consistent, attractive returns above the benchmark over time.

Thorsten: The team decided to join AllianceBernstein to benefit not only from AB’s global presence and extensive resources as a global asset manager but also to grow and thrive within the entrepreneurial multi-boutique structure of the firm. AB enables us to focus on investing the way we always have, with the same established team built around one common understanding of growth investing. 

Thorsten: Volatile and uncertain market environments create challenges for investors, who may be distracted by short-term market events and geopolitical uncertainty. My team and I concentrate on fundamental research and identifying businesses for the Portfolio that are able to profit from structural drivers and underlying trends, which will help sustain them and drive long-term return potential across market cycles. As long-term investors in equity markets, our top priority is to concentrate on stock selection and to own shares of companies that demonstrate robustness and resilience through strong business models—regardless of the macroeconomic environment. Experience has shown that consistency, discipline and dedication are the most effective tools to help us achieve our ultimate goal of delivering long-term returns for our investors and their clients.