The "double discount" equities that might be too compelling to ignore

Please note, this interview was recorded Thursday, 24 April, 2026

European equities have been playing second fiddle for years. Primarily because the US growth engine has been humming along magnificently - so why would anyone bother with Europe? And partly because European regulators have a habit of regulating themselves into oblivion, at least from an investment standpoint.

There is, however, a point at which that lack of demand and persistent negativity starts to look interesting. European equities now trade at a meaningful discount to their US peers, and the opportunity set becomes more compelling still in the small and mid-cap universe.

For Francisco de Juan of EQMC, the real inefficiency sits beneath the surface. Not only is Europe trading at a discount to the US, but within Europe, small caps are now trading at a discount to large caps - a reversal of history where they typically commanded a premium for growth. In effect, investors are being offered two layers of pessimism in one trade.

“We have this double discount effect… Europe is cheaper than the US, and small caps are trading at a discount to large caps. That is very interesting for risk reward" says de Juan. 

That opportunity is valuable, however, only if you can identify the right businesses. EQMC’s approach is grounded in deep fundamental research, long-term thinking, and a clear focus on quality.

“We look for companies that can deploy capital effectively and where we can see cash flow growth in the years ahead, in the decades ahead,” says de Juan.

It is a philosophy that blends public-market investing with a private-equity mindset, combining rigorous due diligence with active ownership.

In the interview above (and summary below), you will learn how de Juan identifies mispriced European small and mid-cap companies, why he believes pessimism towards the region is overdone, and how EQMC seeks to accelerate value creation through hands-on engagement and disciplined capital allocation.

INTERVIEW SUMMARY

A broad universe with limited attention

European small- and mid-cap equities remain among the least efficient parts of global markets. With more than 2,000 companies with market capitalisations below €2 billion and limited analyst coverage, the opportunity set is both deep and underexplored. de Juan’s view is simple: inefficiency creates opportunity, but only for those willing to do the work.

“We find a lot of niche leaders with a global scope, high return on capital, sustainable growth… and there is limited coverage per stock.”

These are not speculative businesses. Many are established operators with strong competitive positions, but they sit outside the focus of large-cap investors and passive flows. That disconnect is where price and value can diverge.

Depth over breadth in research

EQMC’s process is deliberately intensive. Each investment idea can take up to three months to assess, moving through a structured funnel that narrows a wide opportunity set into a small number of high-conviction positions.

“It takes us around three months to research one investment idea… we talk to companies, competitors, clients, and really build a full picture.”

The process blends financial analysis with real-world validation. Understanding the numbers is only one part of the equation; the edge comes from understanding how a business actually operates within its industry.

From an initial universe of 60 to 80 companies, the team typically adds just two to three new investments each year, and typically holds no more than 15 companies at any one time. That selectivity is central to the strategy.

Active ownership as an edge

Where EQMC differs from many traditional equity managers is in its willingness to engage directly with portfolio companies. de Juan points out that many European small caps are run by first-time CEOs, often strong operators but less experienced in capital allocation. That creates an opening for investors to contribute beyond capital.

“Capital allocation is the next challenge when you are a CEO… we try to help on strategy, operational excellence, and capital discipline.”

This is not passive ownership. In roughly half of its investments, EQMC holds board representation, either directly or indirectly. The objective is to accelerate the transition from small-cap to mid-cap by improving decision-making at the top.

M&A as validation of value

Mergers and acquisitions have become an increasingly important driver of returns within the portfolio. Sponsor activity, in particular, has been picking up, with private equity firms targeting under appreciated assets across Europe.

“We have seen four takeover situations over the last two years… three of those have been financially sponsor-driven.”

While geopolitical uncertainty can disrupt deal flow in the short term, the underlying demand for quality assets remains intact. For EQMC, M&A is not the thesis, but it is often the mechanism through which value is realised.

Multiple paths to returns

Looking ahead, de Juan sees several levers that could drive performance across European small- and mid-caps.

“There are a number of companies where the earnings cycle is way below history… and valuations are also below normal levels.”

Earnings remain depressed in parts of the European economy, particularly in industrial sectors that have experienced prolonged weakness. At the same time, valuations sit below long-term averages, and M&A activity is only beginning to recover.

The implication is straightforward. Returns do not rely on a single outcome. A recovery in earnings, a re-rating of multiples, or continued deal activity could each drive upside independently. In combination, they present a more compelling setup.

For investors willing to look past the prevailing narrative, the opportunity is not just that Europe is cheap, but that multiple drivers of value are aligned at the same time.

For more information about EQMC click here