Europe is in good shape despite bailouts, says François Badelon

The ongoing eurozone crisis has been weighing heavily on markets but for Amiral Gestion’s François Badelon things could be a lot worse.

The French boutique’s founder was speaking to Citywire in Paris following Greece’s second bailout and said he has been impressed with how Europe’s markets have weathered the bailout storms.

‘Who would have thought the markets would be at their current level after all that’s happened?’ said the manager of the Sextant Grand Large, adding that with hindsight the result of these recent events could have been utter chaos.

The likelhood of a default for Greece and its fellow southern bailout states is a hotly debated topic. But the worse case scenario of bankruptcy seems to be rather overdone, according to Badelon.

‘Most states went backrupt at some point in time,’ said Badelon, who believes some solace can be found in these potentially bankrupt countries’ equity markets.’

‘When Mexico went bankrupt in the 1980’s, ten years later those who would have had government bonds ended up with nothing but those who had invested in the country’s equity market had regained their losses and at times more.’

The unexpected robustness of Europe’s markets is also creating a lot of opportunities for Badelon and his team, although he admits that risk premiums have shot up.

‘There are actually quite a lot of quality companies on the market that are cheaply priced. The markets valuation estimates are low as investors are anticipating problems so that is creating opportunities. But if you compare this to the interest rate levels, which are currently very low, the level of risk is very high.’

The veteran equity manager launched a new fund last week, Sextant Europe, his first venture into the mid to large cap world.

‘I am not an optimist, I’m more of a pessismist when it comes to the market outlook. Right now I quite like the distribution sector. It is a depressed area, people just don’t want to hear about it.’

Among the companies he is keen on are British groups Keza and Next and while he admits he is not a fan of financials, there are certain stand-out stocks such as BNP Paribas or Crédit Agricole.