We continue to believe European equities present a compelling long-term investment opportunity.

Firstly, the British economy at present appears to be largely unaffected by the Brexit vote, posting robust PMI (Purchasing Managers Index) numbers over recent months. On the Continent, our positive view on the European economy has been further supported by the publication of a raft of very encouraging recent data. Impressively, eurozone manufacturing PMI rose to its highest level for five-and-a-half years at the end of 2016.

Importantly, our recent company meetings supported the headline data. Brexit is rarely mentioned in our numerous company meetings as a threat to the recovery. Here are three opportunities we have identified.

Banks – Lloyds Banking Group

One of the most significant cyclical exposures within our SWMC European fund remains the banks, which constitute 11% of the fund. We continue to believe the market has failed to appreciate the benefits of stable financial margins, coupled with draconian cost-cutting and easing regulatory pressures.

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We have focused on the strongest retail banking franchises, such as UK giant Lloyds Banking Group, where we believe that returns should rather rapidly return to pre-crisis levels. We are also bullish on Italian group Intesa Sanpaolo for the same reason. Elsewhere in the sector, we are also invested in Banco Popular and Commerzbank – banks in the process of disposing of significant amounts of non-performing assets in order to refocus on industry-leading core businesses.

House builders – Taylor Wimpey

Post the UK’s referendum vote to leave the European Union, a number of companies have been consistently more upbeat than many had expected. In particular, UK house builders made a number of encouraging comments. Apart from prime central London property – a niche market with issues long in the making – Taylor Wimpey management informed us activity is as strong as or stronger than before the referendum.

We remain significantly invested in the UK housebuilding industry, which continues to enjoy buoyant demand and limited cost inflation. We also have a position in Barratt Developments in addition to Taylor Wimpey.

Manufacturing – Vallourec

An addition to our portfolio in the latter part of 2016 was French group Vallourec, one of the leading manufacturers of specialist tubes for the oil and gas industry – as well as for the electrical, petrochemical and automotive industries. The company is restructuring in the face of a sharp slowdown in the oil and gas industry. In particular, management is working hard to improve productivity in Europe. It is planning 5,000 redundancies across the group, including 1,000 job cuts in France. In Brazil, furthermore, two blast furnaces are to be closed and manufacturing refocused on one key site.

The combination of €750m cost savings and a recent €1bn capital increase should allow the group to weather further volume declines. With prices already starting to firm up in the US, we imagine its shares could be trading on 1.5 times earnings as we approach the next peak in the cycle.

Stuart Mitchell is manager of the SWMC European fund