In this week’s Fund Calibre podcast, Alexander Fitzalan Howard, Manager of JPMorgan European Growth and Income Trust, explores how earnings revisions act as a key signal for stock performance, alongside insights into sector opportunities such as banks, infrastructure and smaller companies.
The Fund Calibre team also examine the impact of macro developments, including increased European fiscal spending and geopolitical uncertainty.
Why you should listen to the interview: If you want to understand how to navigate European markets beyond the headlines, this interview offers a clear framework for stock selection and portfolio construction.
It combines practical insights on momentum, valuation and risk with real-world examples.
This interview was recorded on 18 March 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Quality, value, momentum
“We have tried to position the portfolio as a core holding and the aim is to generate that sort of steady incremental alpha in different market conditions, if possible.
“And that’s quite important. And I think that’s quite different from a lot of our competitors. And in terms of trying to explain how we approach that, I think there were three key things I wanted to touch on.
“The first is the sort of companies that we want to invest in. We’re looking for stocks that have all or some of the following sort of characteristics: they are quality.
“And by that we focus a lot on profitability of the company, so things like return on invested capital and capital allocation. And we think that is really the best way for the market to judge management, are they using our resources, shareholders resources properly.
“The next characteristic that we focus on is valuation. And there is really no point in buying a stock if all the prospects have already been discounted by the market.
“But at the same time, we’ve got to avoid the companies that are cheap for a reason, what people know as value traps.
“So it’s important to stay clear of them. And I think a lot of investors over the last few years have tended to ignore valuation and focus more on quality and growth and we want that value within our portfolio.
“And then the third characteristic is momentum. And really we are looking for companies where the operational momentum is improving.
“For us, that’s best captured by earnings revisions. So in terms of what we’re looking for in investments, we want to combine those three things: value, quality, and momentum.
“And that gives the portfolio style diversity, which helps generate that steady performance.”
How momentum works in practice
“When we look for companies that have got underlying improvement in their business, the way that we think that is best shown in the market is what is happening to earnings estimates.
“That means analysts are upgrading their forecasts for what the company is going to achieve or downgrading it.
“So analysts raising their estimates or cutting them and we think that’s a really key catalyst for stock price moves.
“Probably the standout sector in the market where this has worked on a positive basis over the last few years is the banking sector.
“I think investors were slow to recognise that the banks have been recapitalised and restructured after the Great Financial Crisis and they got themselves into a much better place where they had not only strong balance sheets after all the historic problems, but were also generating much better returns on their capital.
“And since then, for the last three or four years, they’ve been generally beating expectations when they report their quarterly earnings, raising guidance.
“Analysts have been forced to raise their earnings estimates and that has helped that sector perform really well over the last few years.
“For us, one of our biggest holdings throughout last year was UniCredit, which has been the poster child for that and it’s really helped our performance.”
European banks outlook
“I think there is more to go in banks. Profit growth in the banking sector has been so dramatic over the last few years that despite the good performance, the price earnings multiple has hardly expanded because the profit growth has been so big.
“It is still below the level at which the sector normally peaks out.
“In terms of book value, there has been a rerating. The sector was trading on around 0.5 times book value in 2022 and now it is around 1.5 times.
“But returns have expanded dramatically. Previously banks were generating low single digit returns and now they are making mid-teens or even over 20% returns.
“So that rerating is justified. Estimates are still rising and we are starting to see loan growth come back into the sector, which could drive the next leg of earnings upgrades.
“So fundamentally we are still very positive. Having said that, it became our biggest overweight sector and we have been trimming it slightly to maintain balance, but the underlying view remains constructive.”
Valuation and opportunities in Europe today
“European equity valuations have gone up a bit relative to the US, but there is still a massive discount. More importantly, the valuation spread within Europe is still positive.
“There is still a big gap between the most expensive stocks and the cheapest stocks. That gap is continuing to narrow and because we have exposure to value within our portfolio, that is good for us.
“The most expensive stocks are getting a little bit cheaper in relative terms and the cheapest stocks are rerating. That should help us and it means there are still a lot of stock picking opportunities out there.
“That dispersion is really important because it gives active managers the opportunity to add value through stock selection rather than relying on market direction.
“And in an environment where macro uncertainty remains high, having that breadth of opportunity is crucial. So yes, we remain very positive.”
Conclusion: While macro uncertainty remains, particularly around geopolitics and inflation, the opportunity set within Europe continues to evolve.
“With dispersion still high and stock-specific drivers playing a key role, a disciplined, diversified approach remains critical for navigating markets and capturing long-term returns.
Main image: Europe, tahmeed-ahmad-KYfiXxoQYdo-unsplash
