In a contrarian investment move that has caught the attention of financial markets, Leonard Cohen, the Chief Executive Officer of Ginjer Asset Management, is strategically increasing exposure to battered European industrial stocks, wagering that fears over Donald Trump’s tariff announcements are overblown.

Cohen, whose €173 million fund, Ginjer Actifs 360, has consistently outperformed its peers, is known for his data-driven investment style and a strong track record in identifying undervalued sectors poised for rebound.

From Banks to Industrials: A Strategic Shift

Over the last five years, Cohen’s fund has ranked among the top 2% in performance, largely due to his timely pivot toward European banking stocks during the negative interest rate era. But as 2024 progressed, Cohen gradually reduced banking and insurance holdings from 38% to 30%, reallocating capital to sectors suffering from investor pessimism.

He has increased exposure to industrials, automotive stocks, basic materials, healthcare, and consumer goods, many of which were heavily sold off due to fears of a global economic downturn triggered by trade tensions between the US and Europe.

Valuations Signal Opportunity

According to Cohen, the valuation of many European industrial sectors has reached compelling lows. For instance, banks are trading at a 40% discount relative to the broader market, and automotive and basic resources sectors are similarly depressed.

The 12-month forward price-to-earnings ratio for industrials touched its lowest since December 2023, before stabilising near the long-term average of 19x.

These valuation signals, Cohen believes, suggest that the market has overreacted to recent geopolitical developments, especially around US President Donald Trump’s renewed focus on protectionist policies.

Trade Tariff Shock: A Buying Opportunity

Trump’s declaration of a new “Liberation Day” that included steep tariffs on European goods sent shockwaves through equity markets. The European auto sector plummeted 13% in April, while industrial goods and services plunged 17%.

But Cohen viewed the sell-off as an exaggerated market reaction. As the dust settled, both sectors quickly recovered most of their losses, reinforcing his view that temporary panic can create strong entry points for long-term investors.

The Contrarian Mindset

Cohen’s philosophy is rooted in value investing — looking for opportunities where fear, not fundamentals, drives prices. He explained:

“Solutions exist; nothing is irreversible in this case, and when the market realises this, the rebound can be violent… Things don’t need to turn out perfectly for our investments to work, just a little less dark than what the market prices during selloffs.”

This belief stems from his fund’s historical resilience during crisis phases, including the COVID-19 pandemic and the Russia-Ukraine war, when he stuck with European financials based on valuation metrics.

Faith in Europe’s Resilience

Cohen is confident that Europe’s economy is not on the verge of dislocation. In fact, he suggests that Germany’s stimulus measures will aid recovery and alleviate some of the trade war pressures. Additionally, he believes that Trump, despite his combative rhetoric, is ultimately a pro-business figure and knows when to retreat if needed.

“We see no sign of dislocation and Trump, who’s a pro-business person, knows when it’s time to back down.”

Sectors in Focus: Industrials, Automotive, and Basic Materials

Cohen’s repositioning reflects a belief that investors are underestimating the long-term strength of certain industrial sub-sectors. His fund has been quietly accumulating shares in key automotive manufacturers and suppliers, companies in basic resources like metals and chemicals, and consumer goods firms seen as cyclical plays.

These segments, hit by fears of reduced global trade, are often the first to benefit when macroeconomic outlooks improve.

Performance of Ginjer Actifs 360

Since its inception in 2011, Ginjer Actifs 360 has followed a valuation-driven approach, avoiding panic-driven exits even during extreme volatility. This strategy helped the fund outperform 98% of peers over the past five years, positioning it as one of the most consistent performers in the European mid-cap space.

Cohen’s pivot from banks to industrials could potentially replicate the strong returns generated by his previous sector bets.

Tariffs, Elections, and Market Psychology

With the 2024 US election season heating up, Cohen believes that trade war rhetoric is partly political theatre. He anticipates that markets will adjust once short-term anxieties fade, and fundamentals begin to reassert themselves.

This outlook is informed by his previous experience during politically driven sell-offs, where knee-jerk reactions led to price distortions that ultimately corrected.

Looking Ahead: Betting on the Recovery

Cohen's strategy hinges on one core principle: value always wins out over noise. He expects that as Europe rolls out fiscal support and global sentiment improves, investors will rediscover value in industrials, sparking a rally that could outperform broader indexes.

His fund is positioned to benefit from any such shift, just as it did when banks rebounded post-pandemic.

Conclusion: Betting Against the Panic

In a market clouded by political uncertainty and fears of economic slowdown, Leonard Cohen is once again betting against the herd. By focusing on valuation fundamentals, sectoral undervaluation, and market overreaction to geopolitical risk, Cohen is positioning his fund for another possible outperformance cycle.

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