Fund manager picks the global stocks set to outperform, despite inflation and supply chain issues

Published Wed, Nov 3 20217:52 PM EDT

One European fund manager has named a number of stocks set to outperform, despite persistent inflation and global supply chain issues. Marcus Morris-Eyton, European equities portfolio manager at Allianz Global Investors, told CNBC's " Squawk Box Europe " last week that he foresaw both of these challenges persisting for "several quarters." However, he said that companies which had performed well so far in the 2021 third-quarter earnings season were those with "pricing power," or were businesses operating in areas seeing "extraordinary demand growth." Companies with high pricing power are thought to be able to increase prices without having a significant effect on demand. One stock Morris-Eyton highlighted was French luxury goods company LVMH . "Inflation isn't going away in the short term so companies need to be able to pass on those inflationary pressures to their end customers," he explained. He highlighted LVMH as the "perfect example of a company that has very strong pricing power," demonstrated by the fact that it had actually increased the prices of its goods throughout the coronavirus pandemic. In its third-quarter update, released earlier in October, LVMH reported that it had generated revenues of 44.2 billion euros ($51.4 billion) in the first nine months of 2021, up 46% on the same period in 2020. Morris-Eyton named Danish transport and logistics company DSV as another stock he liked. He explained in a note shared with CNBC that DSV was benefitting from higher logistics costs, amid rising inflation and supply chain problems. In an update released Tuesday, DSV reported that its profits were up to 3.2 billion Danish krone ($493 million) in the third quarter of 2021 , up from 1.3 billion Danish krone for same period last year. Dutch chip machine maker ASML was another stock Morris-Eyton mentioned because of its dominance of the sector. "Companies like that do have market-leading technologies and are able to reinvest in R & D (research and development) to make sure they can defend that position, with strong barriers to entry," he told CNBC's "Squawk Box Europe." ASML reported last week that it had generated a net income of 1.7 billion euros in the third quarter of 2021, up from nearly 1.1 billion euros for the same period last year. In his note, Morris-Eyton also mentioned German IT consultancy firm Bechtle , Swiss industrial valve manufacturing company VAT Group and French cosmetics company L'Oreal , as companies that either had strong pricing power, a good digital strategy or were benefitting from higher demand. In addition, Morris-Eyton highlighted Swiss chemicals company Sika and Irish building materials company Kingspan Group , as companies that were benefitting from green investment, in terms of the growing focus on environmental, social and governance factors.

A pedestrian carries a Louis Vuitton shopping bag, from a store operated by LVMH Moet Hennessy Louis Vuitton SE, on New Bond Street in London, U.K., on Wednesday, Oct. 21, 2020.

Hollie Adams | Bloomberg | Getty Images

One European fund manager has named a number of stocks set to outperform, despite persistent inflation and global supply chain issues.