Is the UK market cheap?

[WickedLester]

Just an open question to see if I can kick off some debate. I happen to think there is some great value particularly in small and mid caps where I do the bulk of my investing. I'm hoping to have some money to invest in the early part of next year if the takeover of STM goes through, my first major success for some time and I'll post what I'm hoping to do with the money if it does just to keep this thread on topic for the board.

I did have some money to invest after some selling some shares on Friday. I invested it in Ashmore, Anpario and Marwyn Value Investors Investment Trust.

Ashmore is an emerging markets fund manager which has suffered very significant outflows in AUM in recent times but I feel the market will turn at some point and the shares look fair value at this depressed stage. They also have very significant net assets and cash. I'm hoping this asset backing means they will be willing and able to sustain the ~10% dividend even if it is not quite covered by earnings.

Anpario is a natural animal feed additives producer which looks fair value tp me at a time when their markets are depressed and I believe the medium term trend is to move away from pumping livestock full of antibiotics and the like towards more sustainable and desirable alternatives such as those ANP develops and produces. The company has a very strong balance sheet and pays a pretty respectable dividend which I hope can be maintained.

MVI is an unusual alternative IT which I really bought for the ~10% yield and huge discount to net assets. I don't fully understand the capital structure and would have to admit I haven't bother researching it deeply so for that reason I haven't made a large investment. The company does, however, appear to have substantial net cash and once again I am hopeful the dividend can be maintained.

If I get the money from STM early next year and the market is still depressed below is a list of the companies I have earmarked for the cash in no particular order and in various weightings.

ABDN - This asset manager appears to divide opinion I have some estimates of the intrinsic value from £4.2bn upwards against a current market cap of ~£3bn. The share buyback has been particularly divisive and it's likely they were overpaying at much higher prices but I believe it makes sense at these prices. I'm hopeful the dividend yield can be maintained/

CHRY - I have made a couple of investments in these types of funds, I already have a small investment in CHRY and also a few more IPO. The market appears to believe that future fundraisings for their investment companies are going to be at a deep discount to the stated NAV but I have taken the view that the market is being too pessimistic and good prospects will always find funding at attractive rates. Also two of CHRY's investments, Klarna and Starling Bank look virtually ready for an IPO.

BMY - I have to admit I have a bit of a soft spot for BMY so hopefully that hasn't clouded my judgement. This publisher has a rock solid balance sheet and pays a modest dividend. It is not vastly cheap at the current price but appears to be growing well so hopefully the current price will look good value in a couple of years time.

SNX - This small company is a provider of surveillance and CCTV solutions. They were particularly hard hit during the pandemic when one of their main markets, casinos, virtually shut down. They also do a lot of work in the oil and gas industry which has also suffered. However the company looks reasonably cheap to me even at these depressed levels and I'm certain their markets will recover to the kind of levels they used to see pre pandemic. They also have a 30% shareholder and I think a sale or takeover is the likely end game here.

AV. - These are probably familiar to most of you, I won't pretend I can understand their accounts but the balance sheet appears sound and the CEO seems to be well regarded. I want these for the excellent yield and relative security of a big cap.

SOM - Probably also familiar to many of you, normally an American company listed in London would raise alarm bells with me but SOM seems to deliver the goods, has a very strong balance sheet and the dividend is attractive.

CAV - This is the result of the merger of FCAP and CNKS, and it looks a very attractive contrarian opportunity to me. The shares should be trading at a discount to net cash and although they may make a loss for a while yet and there may be large restructuring and integration costs they have the resources to absorb these and then I believe they have the propensity to make large profits when the market for IPO's recovers.

LGEN - Much the same as AV.

There are some others I am interested in but they are taking a lower priority, most of them are heavily exposed to consumer spending so I feel they can wait a while until I've got enough spare cash to dip my toe. They are:

CMCX - I already own some of these, bought at roughly twice the price, they are now priced below NCAV and still expect to at least breakeven this year. In the not too distant past they have made very substantial profits. The main bear point from here that I can see was one Director selling a substantial amount of share recently.

HEAD - This flooring and carpet distributor is also trading at a discount to NTAV and has a lot of freehold property. Unsurprisingly the immediate outlook is not great although still expected to be profitable, in more normal times the company is very profitable. There is some debate whether their markets are experiencing a permanent shift but I think they'll be ok.

PMP - I think there'll always be a market for premium home and dinner wares, even if subdued consumer spending knocks it for a couple of years. They look pretty good value to me and trade at a substantial discount to TNAV and at about the level of NCA. The big concern is that debt at the half way stage was pretty high although this is expected to reduce substantially by the year end.

CCT - Once again I feel there'll always be a market for toys and as long as the company gets its product offering right it'll always do ok. They look fair value to me in a depressed year and has often made substantially greater profits. Once again the balance sheet is rock solid. My one big gripe with this one is that the Board pay themselves handsomely well: over £3m a year for the last two years at least for a small company.

Anyway, sorry this post is so long, I hope at least one or two of you made it this far.

Lester

[tacpot12]

The CAPE ratio for the UK Stock Market was around 15 in the summer of 2023, vs. the 40 year average of 17.5 and the ten year average of 16.2, so its cheaper than normal, and much cheaper than the USA where is around 29 but falling.

[Lootman]

The CAPE ratio for the UK Stock Market was around 15 in the summer of 2023, vs. the 40 year average of 17.5 and the ten year average of 16.2, so its cheaper than normal, and much cheaper than the USA where is around 29 but falling.

Yes but the US actually has growth and world-leading companies, so deserves a much higher valuation.

If investing were just about picking the lowest CAPE ratio shares and markets then it would be much too easy to be profitable.

I agree the UK market is "cheap" but it has been for decades and is cheap for good reasons.

[DrFfybes]

The UK has been cheap by many metrics for quite a number of years. For the last decade or more I've had a mix of VUKE, VMID, and VEVE, and only one of thise has increased in value.

I'm sure it will leap forwards,


any




year




now.

[brightncheerful]

I don't think the market is cheap - having said that, LSEG was cheap when I first bought at £68+, sold at £75 or thereabouts, repeated a couple of times, only to rebuy a few at just under £84 for tbh - but I do think many more than the few companies I have the money to buy into are cheap.

Among the few are:

THRL - Target Health Care
SOHO - Triple Point Social Housing
VID - Videndum (sp clobbered by the writers and actors strikes in the USA, and retailers overstocking; now awaiting a trading update, the strikes effectively ended)

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BMY was around £1.56 when I toyed around but gave up on it. Even though I rebought it in October last at £4.06, it concerns me that for the revenue growth to continue, at least the same number of sales to regular buyers will have to be maintained or a combination of fewer regulars plus more from first-time buyers. Rightly or wrongly, I tend to buy shares in companies based on my tendency to be ahead of my time in many respects, having stopped buying fiction some 50 years ago except very rarely, and ever since then non-fiction, I find it fascinating how many people continue to live through other people's imagination rather than their own.

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