The T. Rowe Price European Select Equity Strategy has performed strongly in a volatile market since its debut two years ago. We believe a large part of the explanation for this success comes down to three key elements: our investment philosophy and process, which focuses on innovation and exploiting the investment edge provided by our high‑quality in‑house research; the lessons we have learned from executing and testing our approach; and the opportunities offered by a large, complex market.
As the strategy enters its third year, we view three dynamics as shaping the prospects for the European equity space and the opportunities within the universe:
- A region rich in innovation and disruption
- A leading edge in sustainability
- A shift in the market cycle
Europe Is Rich in Innovation and Disruption
Our aim is to identify, thoroughly understand, and back high‑quality growth companies that are innovators, disruptors, and, as we see it, on the right side of change—qualities that know no national or regional boundaries.
Innovation is not the preserve of the U.S. or Asia, a view that has perhaps been supported by the rise of the FAANGs (Facebook, Apple, Amazon, Netflix, and Alphabet) and their dominant performance over the past decade. Europe, perceived as being encumbered with mostly traditional businesses and dysfunctional banks, is in fact home to a multitude of cutting‑edge manufacturers and a growing number of disruptive health care and information technology companies.
The innovation theme has been central to the construction of the concentrated portfolio within Europe Select. Examples among our top investments include:
- ASML Holding has a monopoly on next‑generation high‑end lithography tools (EUV machines) for semiconductor manufacturers. They will adopt this new machine to increase the number of transistors onto a chip to power cutting‑edge applications.
- Siemens, a global industrial company operating in the power and gas, digital factory, and process industries and in renewables markets benefiting from the so‑called fourth industrial revolution.
- Lonza Group, a Swiss company that is a leading contract manufacturer for drug companies and has a competitive advantage in the rapidly expanding sphere of biologics manufacturing.
- Teleperformance, a global customer experience provider that has become an indispensable part of the fast‑growing digital economy.
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