British bargains: what the experts think
● Backing Blighty
“Cut-price consumer bargains” were flooding the internet in the run-up to the Black Friday shopping extravaganza. There are also some good deals to be had on stock markets, said Ian Cowie in The Sunday Times. “Even if you are a Brexit pessimist”, this looks like a promising time to start shopping for some “British bargains”. There’s certainly a discrepancy in prices, as Adrian Lowcock of investment platform Willis Owen observes. As of last week, the FTSE allshare index was down by about 15% this year, “compared with the MSCI World Index which is up 5%”. But we are now seeing a “revival of interest” from professional investors. That much is apparent from takeover activity, according to Ben Yearsley of Shore Financial Planning. “We have seen 17 takeovers in small- and medium-size companies during the last few months.”
● Pooled funds and blue-chips
Punting on individual shares is a risky business – far better to look for “pooled funds” that spread your cash over dozens of different businesses. Yearsley favours Fidelity Special Values and Montanaro UK Smaller Companies; Lowcock recommends Man GLG Undervalued Assets. But many finance professionals – particularly those who are of a “contrarian bent” – also see bargains among UK blue-chips, particularly banks. Richard Hunter of Interactive Investor admits NatWest is “one for the brave” (shares are down 38% this year), but notes that the high street bank is “awash with capital”. Meanwhile, financial adviser Alan Steel reports that “the smartest investor I know has put a huge pile of chips on Lloyds Bank”.
● Oil resurgence
News of vaccine successes has already given a shot in the arm to UK oil stocks. Royal Dutch Shell is up by 27% in the past month, but shares are still “little more than half their level a year ago”, said Ian Cowie. They jumped further this week as “investors poured into London’s two supermajors” – BP being the other – as part of a wider “reopening trade”, said Tom Howard in The Times. According to Bjarne Schieldrop of the Nordic bank SEB, “an oil demand rebound in 2021 is now a certainty, and markets are not waiting to price it in”.