Janus Henderson European Smaller Companies Fund on DEUTZ AG
Thesis
DEUTZ is diversifying beyond its traditional off-highway engine business into energy and defence, areas the managers believe offer higher growth potential. Its shares were helped by shareholder approval of the acquisition of profitable defence company FFG. The thesis is that diversification into structurally faster-growing end markets can improve the company's growth profile. ([Deutz AG][13])
“The German off-highway engine manufacturer has been diversifying into the energy and defence sectors, which we think offer higher growth potential.”
Key risks
- Execution risk in expanding into energy and defence
- European small-cap exposure remains vulnerable to elevated energy prices and tighter monetary policy