The time for investing in safe stocks has passed, fund managers will have to dig much deeper for returns now, according to Acatis boutique founder and value investor Dr. Hendrik Leber.
Having sold shares in well-known names such as the UK financial firm Henderson Global Investors, German chemical company BASF and bookmakers William Hill this week, Leber said he is confident on the potential for finding good companies at cheap valuations in Europe, despite the market having already had a good run.
'We've noticed the market has started to gain some risk appetite and are already looking for less covered names in Europe. This will help us to create good value over the next six months.'
''The valuations in the safer names are too high - the phase for investing in nice equities is over.'
Companies Leber has recently bought in the Acatis - Aktien Global Fonds UI which fit this remit include IT firms Hewlett Packard and Dell.
While one of his largest positions in the Acatis - Aktien Europa Fonds UI A1 is copper company Aurubis.
'I like this company because nobody has heard of them or really understands the niche market they work in. This is one of the companies that will gain investor interest as people need to dig deeper for returns.'
Europe to outstrip the US
The German manager also believes European equities are set to outperform their US counterparts as the world's largest economy addresses domestic problems.
Fiscal issues in the US, he says, will dominate the markets this year as European equities continue their upward trend, at least for the first part of the year.
'As Europe is once again being seen as a respectable market, the US is giving us the most grief. We think the European market will outperform the S&P 500 this year,' said Leber.
'We'll invest in US tech companies because they are globally facing but we'd rather stay away from domestically-facing consumer stocks until valuations have come right down.'
As an example, Leber holds US software giant Oracle in his global equity portfolio but has decided to hold out on investing in household goods comapny Bed, Bath & Beyond.
'We looked at the company this week and whilst we really like it, we're just not confident on the domestic economy yet and so need valuations to still go lower.'
Hendrik Leber runs 11 funds at the Frankfurt boutique, covering four sectors; Equity Europe, Equity Germany, Equity Global and Mixed Asset. His most significant outperformance has come from his mixed asset funds where he has returned 27.2% compared to 3.7% from the average manager in the sector.