Cambiar International Investment Analysts Daniel Windoff and Robbie Steiner recently attended various conferences, where they met with dozens of corporate management teams and investors across Europe.

In this Q&A, they share key takeaways from their meetings, ranging from macroeconomic sentiment and sector dynamics to emerging investment themes that could align with Cambiar’s Quality | Price | Discipline (QPD) philosophy.

Daniel and Robbie play integral roles in the research and management of Cambiar’s International Equity portfolios. With a focus on uncovering high-quality businesses trading at attractive valuations, they bring deep experience in evaluating companies across a range of sectors and geographies.

Q: What were your top takeaways from your recent trip to Europe?

Daniel – The current macro climate has introduced a higher degree of uncertainty, leading to a larger focus on cash generation and sweating assets, rather than on growth spending, R&D, and capex investments. Companies, especially those with strong pricing power, can mitigate pressure from tariffs, but uncertainty of trading conditions has led to cautiousness.

Robbie – There was a lot of enthusiasm over European spending earlier in the year driving up the broader market. Now, the winners who are capturing the spending opportunity are a narrower group.

Q: Did you notice any recurring themes or concerns across the companies and investors you spoke with?

D – There are early signs of a resilient yet weakening consumer. Companies in the travel, leisure, and apparel industries are still seeing good demand and healthy bookings. However, signs of spending or the rate of change of increased revenue are turning weaker. Investors are focused on tariff and currency exposures as dispersion across and within sectors is increasing.

R – In the industrial economy, there are a few industries that are capturing growth, like defense, grids, power generation, and some infrastructure. Beyond these segments, companies selling into the broader industrial economy (logistics, housing) and local manufacturing, particularly in the automotive sector, were harder pressed to increase order books.

Q: How is the current European economic environment – slowing growth, easing inflation, potential rate cuts shaping corporate outlooks?

D – The macro environment and growth forecasts have been revised downward due to weaker exports, heightened uncertainty, and softness in investment. Trade policy is weighing on corporates, resulting in a generally muted tone in outlooks.

That said, real GDP growth is expected to remain around 1% in 2025, with modest improvement projected for 2026 and 2027. Inflation, both in input costs and labor, is easing, putting less pressure on companies than seen in previous years. While regional differences persist, the broader message across companies and industries is one of cautious optimism. Depending on continued inflation dynamics, additional rate cuts in 2025 remain possible.

R – Agree. I would have expected to see higher levels of total GDP growth, given the government spending component as a tailwind. However, this may highlight the weakness of the export economy, particularly in competition with China. I was also surprised at the number of smaller industrial companies looking to outsource operations from high-cost Germany to lower-cost areas, such as Eastern Europe. That said, the DAX continues to push all-time highs, driven by spending tailwinds and the strength of large-cap leaders like SAP, Siemens, Airbus, and Rheinmetall. We certainly look for companies that are not dependent on broader GDP growth to succeed.

Q: Which sectors seemed most optimistic about growth in 2026 and beyond?

D – Leisure and apparel companies expressed a generally positive outlook for 2026 and beyond, following a challenging stretch marked by elevated costs. Within the segment, there remains notable differences between brands and product offerings. Cruise lines, hotels, and mainstream apparel appear particularly optimistic. However, expectations are for more moderate growth rates after several years of strong demand driven by “revenge travel” and elevated discretionary spending.

Q: Conversely, which industries appear to be under the most pressure right now?

D – Healthcare remains under pressure, particularly following recent developments related to Section 232 investigations in medtech and proposals for more centralized U.S. drug purchasing, an approach that introduces elements of state-driven intervention unfamiliar to many global healthcare firms.

Auto manufacturers, especially those focused on mass-market segments, are facing heightened competition from new entrants at lower price points. In addition, a slower-than-expected transition in battery electric vehicle (BEV) demand has disrupted production plans and margin expectations.

Ingredients producers are also experiencing pressure as organic growth normalizes. After several years of severely elevated demand in subsegments such as fragrances and food ingredients, growth trends are tapering, prompting investors to recalibrate valuation frameworks in light of more moderate, structurally lower growth prospects ahead.

Luxury companies, who as a cohort, have pushed pricing fairly aggressively over the last few years are seeing a more challenging environment. While this sector tends to fare better than other retailers in downturns, they may be more dependent on volumes to support sales growth going forward.

R – Logistics and trade, autos and trucking, as well as companies supplying technology components into the weakening manufacturing sector, have all come under pressure. Following the rally earlier in the year, many of these industries experienced order book disappointments as demand failed to keep pace with elevated expectations.

Q: Did you see any emerging themes (e.g., energy transition, supply chain reshoring, digitalization, AI adoption, healthcare innovation) that could shape investment opportunities?

D – Healthcare companies continue to emerge as clear beneficiaries of AI adoption. Drug development timelines are shortening, and asset prioritization is helped by faster and more sophisticated data applications. Medical technology designs are also improving at a more rapid rate. However, this acceleration may result in a less predictable competitive landscape, where market share shifts occur more rapidly than in the past.

R – Key emerging themes include defense, power grids, and infrastructure development. Apart from AI datacenter demand, we do not yet see most industrial companies directly capturing the benefits of AI; rather, we continue to see them as supply chain facilitators.

Q: How do these themes align with Cambiar’s International Equity portfolios?

D – The healthcare theme aligns closely with our International Equity portfolio positioning. We believe that leading biopharma companies such as AstraZeneca and UCB are positioned to capitalize on the technological trend. Over time, the effective use of data in drug development and clinical processes has the potential to drive higher returns for these businesses.

R – We look for good business models and try to be aware of exposures to durable trends. Our thematic exposure involves rail infrastructure, power grids, mining supply chains, commercial aerospace consolidation, automation, defense, and shifting supply chains. Representative holdings include Knorr-Bremse, E.ON, Epiroc, Airbus, Daifuku, Thales, and Intertek, respectively. Each reflects our bottom-up conviction in companies benefiting from these long-term industrial and technological transitions.

Q: What risks, geopolitical, regulatory, or market-related, are most top of mind for European corporates?

D – Tariff uncertainty and foreign exchange volatility remain key concerns for many of these businesses. Mitigation maneuvers such as relocating production are possible, but technologically advanced companies tend to have complex supply chains that are not easily moved of replaced.

R – Yes, they mention tariffs from the Trump Administration quite a bit, particularly in trucking and other local manufacturing industries.

Q: How does Cambiar’s process help navigate these risks while still capturing opportunity?

D – We always look for adaptability in our holdings. Companies who can respond to change in a better way than others tend to improve their competitive position in volatile scenarios.

R – This is where the QUALITY component of our process comes in.  We evaluate how much control a company may have over its own situation.

Q: How does Cambiar’s International strategy differ from broader benchmarks or passive approaches in navigating international markets?

R – Our process seeks out our most aligned opportunities, identifying high-quality businesses with durable fundamentals and management teams that can execute through various market cycles, while maintaining a high attention to the price paid relative to our outlook.

This disciplined approach enables us to participate in upside potential while seeking to mitigate downside risk.

In contrast to broader benchmarks or passive strategies that often allocate capital indiscriminately, Cambiar’s International strategy concentrates on our highest-conviction ideas, resulting in a more focused and dynamic portfolio.

D – Agreed, our stringent selection criteria and concentration helps us to focus on businesses who can extend their leadership over time.

Q: Why is now a compelling time for investors to consider Cambiar’s International offerings?

R – A strong year of international outperformance despite global investors remaining broadly under-allocated to non-U.S. equities underscores the difficulty of timing performance across regions. This occurred even as European GDP growth lagged that of the U.S., but many individual companies in Europe (and other developed international markets) are accelerating earnings growth from more attractive valuation levels. We believe there should always be a healthy allocation to unique, high-quality, competitively advantaged businesses that are simply unavailable in the U.S. By maintaining a disciplined, bottom-up approach, we seek to capture these opportunities as global allocations begin to normalize back to targets.

D – Great companies are found across the world. The marketplace for leading companies is largely global. Having exposure to international equities as well as domestic companies is a sound way to capture opportunities globally.

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