Is this Europe’s answer to Apple?

07 July 2021

4 minute read

While the global technology sector is typically associated with mega cap companies in the US and across Asia, there are a number of European companies which are just as important and just as interesting. Here, we take a look at a company from The Netherlands which is fundamental to the development of the semiconductor industry, and three funds that invest in the business for three very different reasons.

Who's it for? All investors

Ask anybody to name a successful technology company and Apple is probably the most popular reply. And why shouldn’t it be? Just over half the new phones sold in the UK are Apple, and they dominate the tablet market1. In fact, in 2020 Apple became the world’s largest company. But there’s another company that is instrumental in virtually every technological device we all use. And it’s a little-known company from The Netherlands called ASML.

The building blocks of 'everything'

From the phone in your pocket to the weather satellites orbiting the Earth, there is one component that lies at the heart of them all – a semiconductor chip. Over the years, these chips have become more and more powerful, while at the same time becoming smaller and smaller. And while there are many companies manufacturing the chips, from Intel and AMC to Samsung and Toshiba, AMSL is the company that makes the production possible. ASML makes the machines which all these companies use to make the chips.

Semiconductor chips are so small that they require specialist equipment to make them. The chips consist of billions of transistors – far too small to construct with traditional materials such as wire and solder. Instead, the machines ASML manufacture ‘print’ the circuit boards onto a small wafer of silicon, in the same way as an office printer operates. And because ASML is instrumental to the global technology sector, it’s a company that fund managers like, and for quite different reasons.

Polar Capital Global Technology Fund

The focus of the Polar Capital Global Technology Fund is to find the ‘next generation’ of technology companies. This means looking for the companies which are set to become stronger and fitter. One of those areas is artificial intelligence, whether that be self-driving cars or grocery deliveries by drone. All these areas demand faster and faster semiconductors, and ASML is the company that makes this possible.

BlackRock European Dynamic Fund

The team behind this fund look for what they call ‘compound growth’ companies. These are companies which they believe have the ability to continue to grow for a very long time. But the problem with a company that grows quickly is that other companies will come in and try to compete in their market and ultimately no single company will be able to continue to make oversized profits.

So, the team look for companies that produce products that are very difficult for others to make. Because ASML is continually innovating and improving, it’s extremely difficult for competitors to move into that market. A true ‘compound growth’ company.

Janus Henderson Global Sustainable Equity Fund

Another fund and another very different approach to investing. Yet it’s another fund that invests in ASML. Why? The aim of the fund is to invest in companies that are having a positive impact on the environment and society. For every company they consider investing in, they ask themselves the question, “is the world a better place because of this company?”

The team’s view on ASML is that because its technology enables the advancement of ever smaller, cheaper, more powerful and energy efficient semiconductors, this, in turn, results in increasingly powerful and capable electronics that enable the world to progress within a multitude of fields, including healthcare, technology, communications, energy, mobility, and entertainment. In their eyes, the world is indeed a better place because of ASML.

Europe’s Apple?

OK, so ASML is not a High Street brand you recognise when shopping for a new phone or tablet. And it’s not a $2 trillion size company. But as one of Europe’s most successful technology companies (that you’ve probably never heard of), its share price has significantly outperformed that of Apple (Figure 1) over the last 5 years (+602% vs +471% respectively, as at 1 July 2021). Note that past performance is not a reliable guide to future performance.

Figure 1: Performance of ASML versus Apple over the last five years
  30 Jun 2016 to 30 Jun 2017 30 Jun 2017 to 30 Jun 2018 30 Jun 2018 to 30 Jun 2019 30 Jun 2019 to 30 Jun 2020 30 Jun 2020 to 30 Jun 2021
ASML 31.35% 51.92% 5.03% 77.00% 87.87%
Apple 50.65% 28.53% 6.92% 84.32% 50.18%

Source: Bloomberg. Past performance is not a reliable guide to future performance.

In addition to the Polar Capital Global Technology Fund, the BlackRock European Dynamic Fund, and the Janus Henderson Global Sustainable Equity Fund, there are several more funds on the Barclays Funds List which invest across all parts of the technology market. Find out more information on these funds.

Correct at the time of publishing.

To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.

Past performance of the fund and its manager are not a reliable indicator of their future performance.

We don’t offer personal investment advice so if you’re unsure you should seek that independently.

Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

Read the Assessment of Value report [PDF, 3.2MB] for funds run by Barclays.

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