Notes from the Investment Floor: Finding opportunities in disruption

Richard Watts, co-Head of Strategy, UK Small & Mid Cap at Jupiter AM, examines recent economic data out of the UK and reveals why disruption is here to stay.
Richard Watts

Co-head of Strategy, UK Small & Mid Cap

Jupiter AM

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Recent economic data out of the UK has come in just shy of expectations, with month-on-month GDP growth standing at 0.1%. This has been caused by supply chain shortages which have been visible to consumers, as supermarkets and other consumer goods companies have had to deal with empty shelves and depleted stock.

While this has caused some analysts to moderate their outlook for UK growth, I believe that this is not endemic to the UK economy and is transitory in nature. Although the data was slightly disappointing, I think that looking into next year, the UK is well-positioned for a robust recovery.

This has filtered through to the stock market, with the cyclical stocks that had made such a strong start to the year falling off over the past three months, as the market favoured Growth stocks. This is a trend which I see continuing as we head into 2022.

Looking within the market, I believe that companies which can disrupt their industries remain exciting investment opportunities given the current economic backdrop. Over the last three years it has become apparent that many of the more traditional brick and mortar businesses are under enormous pressure from disruption caused by structural economic changes which have been accelerated by the pandemic.

The stock market has reflected that, particularly in the UK – for example, the FTSE 100 is currently trading around 12.5x earnings which is a massive discount compared to other markets around the world.

Looking forwards, I believe that legacy business models will continue to be challenged by young, disruptive companies creating new value networks and I look forward to the opportunities this presents.

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Notes from the Investment Floor: Finding opportunities in disruption