Our Favorite European Small-Caps


Our Favorite European Small-Caps by Royce Funds.

The video Portfolio Manager and Director of International Research David Nadel talks about some European small-caps that he currently likes can be seen here.

“The chief reason I think people should look at Europe now is just because it’s home to a lot of world-class businesses that are export oriented.

“One of our top holdings in the Royce European Smaller-Companies Fund is a French company called Stallergenes SA (EPA:GENP) (OTCMKTS:STLEF). Stallergenes focuses on respiratory allergies and they develop pharmaceuticals for respiratory allergies as opposed to sort of the palliative treatments like Claritin that are over the counter. It’s a 60-year-old company with a really nice track record.

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“The French also have a company called Virbac SA (EPA:VIRP), which is the global number one in animal pharma. The animal pharma business is a great business. It is a business with a lot of pricing power. It’s not cyclical. You think about when you go to the vet and you get eye drops for your hamster, the eye drops can cost three or four times as much as the hamster does. The vet is the one who’s dispensing the medication as opposed to human pharma where it’s a pharmacist—so totally different dynamics. And to get pure-play exposure to animal pharma you pretty much have to go to France.

“In Finland there’s a company called Nokian Tyres plc (HEL:NRE1V) (OTCMKTS:NKRKF), which we have an investment in the Royce European Smaller-Companies Fund. They focus purely on winter tires. The tire market in general is a tough business, but the winter tire market is a great business. Very high margins, very high returns on invested capital. A lot of their sales come from Russia, so we’re getting exposure to Russia through Finland. There’s better corporate governance in Finland. But again, a unique business.”