Smaller companies: on the road - Europe

Across both events, I met with nearly 25 companies from various European countries and sectors – engaging in far-reaching discussions with business leaders, policymakers and stock analysts. Here’s what stood out.

Defence is here to stay

Exposure to the defence industry has been a red flag for investors for over a decade. No longer. Thanks to US President Trump’s trade policies, his stance on NATO, and the ongoing Russia-Ukraine conflict, defence has become a hot topic and was discussed at nearly every meeting I attended.

Europe appears split into three distinct groups when it comes to defence spending as a percentage of GDP:

Frontline states (Poland, Finland, Baltic nations): closest to the conflict zone, these countries are expected to allocate the most to defence, driven by elevated risk perception.

Major western powers (Germany, UK, France): Germany stands out as capable of meeting its defence needs. The UK and France are fiscally constrained and likely to focus on selective capability enhancements.

Southern Europe (Italy, Spain): more distant from the conflict, these countries face the challenge of convincing their populations to increase defence budgets.

I met with Indra Sistemas, a Spanish company positioning itself as Spain’s national defence champion. It has seen significant order book growth over the past year while continuing its acquisition strategy. One to watch.

Germany opens the fiscal floodgates

After two years of economic contraction and decades of underinvestment, Germany’s relaxation of its debt brake marks a major shift, both domestically and across Europe. The reform enables €500 billion in public investment over the next 12 years, targeting defence, infrastructure, climate initiatives, education and healthcare.

Several companies stand to benefit, although the impact has yet to show in their profit and loss statements. I expect spending to start appearing from 2026 onwards, with longer-term benefits due to the strategic nature of the investments.

France’s political merry-go-round

France’s political and economic landscape remains deeply unstable. The recent vote of no confidence against former Prime Minister François Bayrou and the reappointment of Sébastien Lecornu – who himself narrowly survived two no-confidence motions – highlight the volatility. Lecornu’s fragile government faces a divided parliament, contentious budget negotiations, and mounting public frustration. One gets whiplash trying to follow the news.

Unsurprisingly, some of the companies with French exposure I met during my trips have underperformed. The exception is globally oriented firms like GTT, which specialises in LNG (liquid natural gas) containment systems and benefits from international exposure despite its French listing.

Tariffs, tariffs everywhere

The ongoing fallout from US tariffs was another major theme. Questions abounded – not least, who will bear the cost: consumers, companies, or intermediaries?

I met with CIE Automotive, a long-standing holding and leading Spanish auto parts manufacturer. Despite a challenging start to 2025 for the automotive sector – largely due to Trump’s tariff threats – the company has delivered a solid outlook and improved margins. Its growth is driven by strong exposure to emerging markets (EM).

The EM play has further to run. As European OEMs (original equipment manufacturers) face pressure from the entry of Chinese vehicles and the US tries to stabilise post-tariffs, the future of growth lies in EM. The key challenge ahead for CIE Automotive is maintaining high margins while continuing to expand operations.

The quest for domestic revenues

A standout meeting was with ASR Nederland, which reminded me of the importance of domestic revenue exposure. Operating entirely within the Dutch market, ASR has performed well year-to-date thanks to management’s disciplined execution. Dutch pension reform has also enabled growth in core businesses.

Meanwhile, its successful ongoing integration of Aegon Nederland has expanded its customer base and improved operational efficiency. Impressive underwriting results and healthy inflows have supported profitability. Its local investment strategy reinforces its resilience.

Italy’s asset gatherers: from BTPs to ETFs

For nearly a year, Italian asset gatherers – firms that collect and manage client assets – have enjoyed remarkable inflows. As interest rates fall, investors are rotating out of Italian government bonds (BTPs) into riskier assets. A massive intergenerational wealth transfer has further boosted flows.

I met with FinecoBank, where recent results confirmed robust inflows and successful customer acquisitions. With control of around 70% of the local exchange-traded funds (ETF) market, FinecoBank is well-positioned to become a significant player in this space across Italy.

Final thoughts…

Conferences are always an invaluable way to meet companies, investors and gauge where Europe is heading. As ever, there were positives and negatives. Defence spending is creating new opportunities. Emerging markets are opening up for autos, while domestic revenues are as important as ever. Politics remain turbulent.

Against this backdrop, I continue to meet numerous high-quality European firms that are delivering results and gaining market share. As we move into 2026, one thing is clear: life is never dull for a European investment manager.

Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.