Once the uncertainty of the Brexit negotiation ended, some investors began to take positions in the United Kingdom and this has been reflected in the better performance of the FTSE 100 index since the beginning of 2021.
Some will speak generically of the elimination of the bureaucracy but the main reason is that there is life after Brexit and that the market had become very cheap.
The agreement is the beginning of a long road whose consequences can be:
- Increased regulation
- Opportunity to restructure the economy, giving less weight to the financial and real estate sector and more to technology, pharmaceutical and industrial
- Increased exchanges with China, India, and the United States
- Some rise in inflation could be positive for value stocks and supermarkets.
In the end, every asset has a price and after the FSTE 100 fell by 11.45% while the EURO STOXX 50 only did it by 2.50%, many of us wonder if an investment in that market has the power to win these years.
In addition, to the fiscal and monetary measures adopted to stimulate the economy, as in other European countries, what is especially attractive in this market are the valuations and the return of the value bias for companies.
The weight of the pharmaceutical, mining, and oil industries is much greater than in the European indices. In addition, the lower presence of technology prevents us from valuations that can be affected by high interest rates. Banks would also benefit from the likely long-term rate hike that everyone is discounting by the new Democratic administration.
At the index level we see the following valuations:
But not only the FTSE 100 for its love of the old economy offers value. Perhaps the most relevant are the companies with the smallest capitalization FTSE 250 and focused on the domestic economy where the discount in relation to other indices represents 40%.
Before the pandemic, the dividend yield in the British market was among the highest in the market and we believe that as we return to normal it will continue to be. After cutting them by 47% in 2019 as soon as the current situation continues and as long as the aforementioned sectors (banks, oil companies, pharmaceutical companies, mining companies) have had the worst, as I believe they will increase them, as some companies are already beginning to do.
What funds allow us to access British equities?
|Category: British Equity|
|Aberdeen SUK Equity Fund|
|Janus Henderson United Kingdom Absolute Return Fund|
|JOHCM UK Growth Fund|
|Liontrust UK Growth Fund|
|Merian UK Dynamic Equity Fund|
|Mirabaud – UK Equity High Alpha|
|Ninety One UK Alpha|
|Schroder UK Alpha Income|
|Threadneedle (Lux) UK Equities Fund|