DNCA's Chebar on the value of legacy businesses in the retail space

clock
DNCA's Chebar on the value of legacy businesses in the retail space

Partner Insight: Isaac Chebar, manager of the DNCA European Select Equity Fund, discusses why big box retailers shouldn't be discounted - despite the growing number of e-commerce upstarts

These are harsh times for many long-established big box retailers. As they lose market share to newcomers, big retailers find themselves fighting for their futures, consigned to apparent irrelevance by the disruption of their sectors.

The Amazon model is among the biggest threats. Now approaching a 50% market share of US online sales, the online giant is investing heavily to try to replicate that dominance in Europe. Meanwhile, agile new start-ups, unencumbered by legacy businesses, are making inroads too.

In some cases, however, the markets may be too quick to write off the old guard. That is certainly the view of Isaac Chebar and his team of portfolio managers of the DCNA European Select Equity Fund at DNCA Investments, an affiliate of Natixis Investment Managers.

A contrarian view

The fund has a contrarian bias. It is designed to seek out undervalued equities in continental Europe. But while challenging the market consensus on several fronts, he is candid about the current underperformance of value stocks. Across developed markets, these have been outpaced by growth stocks since 2009, barring a brief rebound in late 2016.

One of the key reasons he highlights is the decline in bond yields brought about by the central banks' easing of monetary policy.

That has a disproportionate effect on companies with heavy capital investments and assets. Their challengers, meanwhile, effectively benefit from ‘free capital' that helps them advance into their markets. "Established companies have responsibilities to deliver growth and dividends to their shareholders. But start-ups and the tech giants have the freedom to take market share without necessarily making a lot of profit", Chebar points out.

Click here to learn more about Isaac Chebar's process for picking quality value stocks in Europe.

More on Partner Insight

Partner insight: Taking on climate change through fixed income
ESG

Partner insight: Taking on climate change through fixed income

ESG challenges are complicated and diverse for many asset classes, and fixed income is no exception

Invesco
clock 23 May 2022 • 1 min read
Partner insight: Adapting to a changing interest rate environment

Partner insight: Adapting to a changing interest rate environment

2022 has been a turbulent year but in terms of monetary policy, it has also been a fascinating one

Invesco
clock 06 May 2022 • 1 min read
Partner insight: Tackling inflation - the fixed income view

Partner insight: Tackling inflation - the fixed income view

With real yields negative in many markets, where might you find the returns you need?

Invesco
clock 03 May 2022 • 1 min read
Trustpilot