Artemis SmartGARP European Equity Fund
Q1 2026 update

Overview

In early March, the fund reached its 25th anniversary. Philip Wolstencroft has been its manager since inception. Over that timeframe, it has returned 9.3% per annum, compared to 7.0% for its benchmark and 6.4% for the average Europe ex-UK fund (from our fund’s inception on 7 March 2001 to 31 March 2026). These may seem like small differences, but £100 in our fund has grown to £834 (after fees), whereas the average fund in our peer group would have turned £100 into £373 and the market would be at £440.

As John Maynard Keynes once pointed out, in the short term, markets are voting machines but in the long run they are weighing machines. Our fund has done well over the long term because our SmartGARP process steers us towards stocks that subsequently outgrow the market. Our fund currently sits on a prospective price-to-earnings (p/e) ratio of 9.3x – exactly in line with its 25-year average – so we see little sign of excess and plenty of reasons for optimism.

Performance 

The fund returned -0.3% during the first quarter, versus a benchmark return of -2.0%. It made a strong start to the year, but has given back some performance since the Iran conflict began.

Past performance is not a guide to the future. Source: Lipper Limited/Artemis for class I accumulation GBP to 31 March 2026. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. Classes may have charges or a hedging approach different from those in the IA sector benchmark.

SmartGARP works by exploiting as many factors as possible. We like to buy stocks with good growth, low valuations, upgrades to profit forecasts and good price momentum. SmartGARP tends to struggle when themes change and when the market is very narrow. In March, the market changed direction and became (understandably) focused on one thing (the oil price), so we struggled to make much progress. Higher risk stocks exhibiting good growth and earnings upgrades performed poorly, while low-risk, modestly valued stocks did well. As such, our factors were mixed.

Activity 

Over the past quarter, we moved further underweight in industrials and nudged up our exposure to oil. By country, we reduced our exposure to Greece and added to France.

In terms of stocks, we reduced our positions in Prosus (e-commerce), Mapfre (insurance), Novartis (healthcare) and Italgas (energy). We recycled the proceeds into stocks such as BNP Paribas (banking), Ipsen (biopharma), Sanofi (biopharma), Nordex (wind turbines) and Yara (fertiliser). In general, the logic was to ensure the fund owns attractively valued stocks with earnings upgrades.

By way of example, we bought Yara because it was cheap and growing. Yara makes fertiliser from Norwegian-sourced energy. The crisis in the Middle East transformed investor sentiment so the shares re-rated. Maybe we got lucky – but maybe the risks were skewed in our favour.

We initiated a position in Capgemini, which offers consulting, digital transformation and technology services. Until quite recently, the stock traded on a significant premium to the market but worries about AI mean it is now unloved by investors.

Outlook 

Buying unloved stocks where news is good tends to skew the odds of success in our favour. Indeed, over the past 25 years, we have made about 15% of our outperformance from getting sectors right, but 85% from getting stocks right. Our inclination is to keep an eye on broad sector themes, but to focus most of our attention on looking for mispriced stocks.

Events in the Middle East and their impact on energy prices and the global economy are hard to predict. If oil prices remain high, then a recession could ensue, but if oil starts flowing again, the risks of recession will be lower. At the moment, however, nobody knows what will happen. Investors are (understandably) reluctant to pay heed to bottom-up news flow from companies when geopolitics is dominating attention. Amid this uncertainty, our simple goal is to keep doing what we have been doing for a quarter of a century: focusing on stocks with good financial characteristics. This discipline is what has driven the fund's outperformance over the years.