Following conflicting consumer sentiment data on a backdrop of sluggish global growth, Allianz's European equity manager, Matthias Born, said he is most positive on discretionary consumer stocks for the month's ahead.
More defensive assets such as consumer staple names, said Born, have been boosted this year by a risk-off sentiment that has returned in the past few weeks after a period of rising sentiment following central bank measures.
This bodes well for the discretionary sector.
'Recently, we have seen a strong development among defensive consumer goods producers (consumer staples). A catch up of discretionary consumer goods e.g. luxury goods is not unlikely,' Born, who runs the €400 million Allianz Euroland Equity Growth, told Citywire Global.
Monetary policy intervention in Europe and the US over the summer, however, saw some lower quality stocks recover. Most notably, financials and banks - the latter of which Born does not invest in - performed well.
This, according to Born, is why his fund Allianz Euroland Equity Growth underperformed over the last three months, returning 2.5% when the MSCI EMU TR EUR index rose 7.2%.
However, the fund's longer term performance has seen it return 54.7% in the last three years while its Citywire benchmark, MSCI EMU TR, risen 9.2% in the same period.
Europe still ripe for luxury goods
Among the fund's largest positions are Inditex, Anheuser Busch Inbev NV, LVMH Moet Hennessy Louis Vuitton and Heineken. It does not, however, have any exposure to the German automobile sector.
'The auto sector is characterized by heavy competition which could have a negative effect on margins,' said Born. 'German OEMs (original equipment manufacturers) are doing quite well in that tough environment, but in a Euroland context we find better opportunities elsewhere in consumer cyclicals, like for example in luxury goods.'
On southern Europe, Born is prudent. Since adding Spanish tech firm Amadeus IT and Italian drinks firm Campari in the summer, he said he has not further increased the fund's peripheral European exposure as macro concerns translate into weaker stocks.
'From a stockpicker’s perspective there haven’t been any other compelling investment opportunities,' he said.