29 March 2021


In recent years, the financial markets have been tormented by various events: fears about Chinese growth, Brexit, the trade war between China and the United States, the election of D. Trump... Each of these events has had a different impact on the markets, some of them causing a form of sector rotation, sometimes favoring so-called value stocks.

Today, and for several weeks now, we are witnessing a strong rebound in value stocks at the expense of growth. This movement was initially supported by the announcement of a vaccine against Covid-19 and a massive deployment of the vaccination program, and then by inflationary fears brought on by a very strong recovery in demand as the crisis came to an end. Indeed, if we look at the European value vs. growth indices, we can see an outperformance of value vs. growth since November 2nd 2020, as shown in the chart below on the Large caps indices.

Graphique 1

Title: performance (in price) of MSCI Europe Value vs MSCI Europe Growth since the beginning of the value rally (02/11/2020)  as of 19/03/2021

Source: Bloomberg

This movement is not a surprise as such, it is in line with what we had already observed in the last quarter of 2020 and shows that the markets are willing to be efficient. The hope of a rapid exit from the crisis via the deployment of vaccines has once again led to a rotation towards stocks that have suffered greatly up to now. At the same time, an exit from the crisis implies a recovery in demand. However, this peak in demand after the crisis may not be followed by production capacity, leading to higher inflation. We can already see this phenomenon in the automotive sector, where manufacturers are facing very long lead times due to component shortages. Nevertheless, central banks continue to maintain their accommodating policies to support the economy and thus sweep away fears of possible runaway inflation in the coming months.

In our view, this phenomenon, driven by renewed optimism about a rapid exit from the sanitary crisis, is a catch-up phenomenon of a transitory nature and should have a limited impact on our strategy. If we look at the period since the first containment in France (17/03/2020), value stocks have outperformed growth stocks in the Eurozone. This is despite the fact that the fundamentals of our companies have generally strengthened considerably during this period. In addition, the companies held in the portfolios have very strong pricing power due to their quality product and market positioning. As a result, they have the ability to pass on inflation to the final price of the product. In this context, we believe it is necessary to remain extremely selective, seeking exposure to companies with strong pricing power and a highly attractive competitive position. Through our investment philosophy and our investment process, we are convinced of our ability to select these types of companies and to accompany their growth over the medium/long term.

This market rotation is not a first and if we look back in time, we can distinguish several similar periods. Indeed, if we look at the financial markets since late 2014, we can see three main value rallies (see chart below), including the one we are seeing today.

Titre: performance MSCI Europe Value vs MSCI Europe Growth depuis le 31/12/2014 au 19/03/2021

Source: Bloomberg

Graphique 2

Graphique 3

Title: performance of MSCI Europe Value vs MSCI Europe Growth since 31/12/2015 to 31/12/2016 (left) and from 28/09/2018 to 31/12/2018 (right)

Source: Bloomberg


Taking a closer look at these two past periods, like 2016, the MSCI Europe Value Index posted a performance of +3.21% while the MSCI Europe Growth Index generated a performance of -4.24%.

During the last quarter of 2018, the MSCI Europe Value Index returned -11.21%, while the MSCI Europe Growth Index generated a return of -12.04%.

Certain events can therefore cause strong market rotations. Nevertheless, if we look back, the normalization of exogenous macroeconomic and political factors has caused the market to turn, once again and after short-term cyclical pressure, towards quality companies and companies offering favorable structural growth dynamics, which is the core of our investment.

Indeed, we are long-term investors and this is the essence of our investment philosophy: to extract ourselves from short-term volatility, created by exogenous factors over which we have no control, by concentrating on companies focused on growth and value creation.

Through this vision of investment, we are invested in the field of medical technologies, where Europe has a real know-how, in the field of digital innovation, which implies a large number of economic models and sectors.

Also benefiting from the rise of digital technology and digital data, we are present in the field of industrial and logistics automation, at the heart of the development of e-commerce and Industry 4.0, where the ability to generate, capture and analyze data is becoming a major source of efficiency in industrial processes.

Finally, we are invested in a number of companies positioned in growth niches, for example in the consumer and service sectors.

Conversely, we do not invest in sectors directly exposed to fluctuations in exogenous factors such as the price of raw materials, such as energy, and more generally in value stocks with stressed industrial models. This very specific positioning should prove decisive when the market becomes more discriminating on the basis of companies’ published results.

It is therefore clear that when there is a sector rotation in favor of value stocks, our funds can be affected in the short term. However, as soon as the market stops focusing on the short term and becomes very selective again, our funds are particularly well positioned to capture this trend, as shown in the chart below. The growing need for automation in factories and supply chains and the structural need for innovation in the digital and medical fields remain strong, as the current sanitary crisis has proven once again.

Title: 5 year performance of Groupama Avenir Euro (M) vs benchmark from 31/12/2014 to 31/12/2019

Source: Bloomberg, Groupama AM

Graphique 5

Title: Performance of Groupama Avenir Euro (M) vs benchmark from 31/12/2015 to 31/12/2017 (left) and from 31/12/2017 to 31/12/2019 (right)

Source: Bloomberg, Groupama AM

Past performance is not a reliable indicator of future performance

Title:5 years performances of G Fund – Avenir Europe (IC) vs benchmark from 31/12/2014 to 31/12/2019

Source: Bloomberg, Groupama AM

Graphique 6

Title: Performance of G Fund – Avenir Europe vs benchmark from 31/12/2015 to 31/12/2017 (left) and from 31/12/2017 to 31/12/2019 (right)

Source: Bloomberg, Groupama AM

Past performance is not a reliable indicator of future performance

The recent market rotation that started beginning of November 2020 remains completely in line with our expectations, even if it was faster than expected because it was achieved mainly in a few days. In this context and given our positioning on quality and growth stocks, our funds have given back their YTD outperformance

Title: Performance or our funds as of 19/03/2021

Source: Bloomberg

Besides this market effect, the companies held in our portfolio continue to publish very good results. Sartorius Stedim has once again increased its 2021 expectations and guidance, highlighting the very strong level of order intake in the first 10 weeks of 2021 and the sustained demand. Teleperformance reported particularly strong organic growth for the year 2020 with an increase of +11.6%. Approximately 75% of the growth is linked to new contracts that will ramp up over the next 6 to 9 months, so this dynamic translates into excellent visibility on the increase in activity in 2021. Management thus expects growth of around +9%, which is the highest level of guidance ever given by the group (guidance at the beginning of the year is generally +6/7%). As for ASM International, the group published results for Q4 2020 slightly above expectations with a very strong acceleration of orders at the end of the year. Management expects Q1 and Q2 2021 revenues of between €380m and €400m, with a midpoint of €390m. Therefore, in the middle of the range, H1 2021 revenues should be up by 18%.

To date, and despite the value rally observed on the markets, we are convinced of the quality of the companies we hold in our portfolios and of their ability to maintain and/or recover their strong operational growth momentum. In the medium term, the market will remain very selective and we must continue to focus on the “best players”. We are also convinced in our investment process and our ability to select tomorrow’s leaders. The companies in which we invest should continue to show strong growth outlooks and gain market share, thereby strengthening their competitive advantage, as shown by recent earnings releases. Certainly, we may see a strong rebound in cyclical stocks with the end of the pandemic in the coming months. Nevertheless, we remain very confident about the medium/long term and are convinced of the quality of our companies and their ability to outperform over the medium/long term.


The main fund risks are:

– Equity risk: Variation in share values can have a positive or negative impact on the net asset value of the fund.

– Equity risk : A variation in equity quotation could positively or negatively affect the fund’s net asset value

– Capital risk : It exists the possibility that the invested capital could not be totally returned

Small/mid cap market risk: On the mid cap markets, volume of traded securities is reduced, market movements are more pronounced downward wise, and faster than in the case of large caps

– Liquidity risk: Due to the exposure to small and mid capitalisation stocks, which could present a limited level of floating capital


By Nina Majstorovic, Product Specialist chez Groupama Asset Management.


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Past performance is not a reliable indicator of future performance

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Edited by Groupama Asset Management – Headquarters: 25 rue de la ville l’Evêque, 75008 Paris – Website: www.groupama-am.com