Why buy UK?

[GoSeigen]

The price paid by individual passive investors is irrelevant.

Yes, they're really special. I think that just about sums up the attitude. Reminds me of a certain investment forum in the 2000's.


The price paid by every investor is relevant, both to the market in aggregate and to that individual investor, whether passive or active. It may be a drop in the ocean but there is no ocean without drops.


GS

[Lootman]

The price paid by individual passive investors is irrelevant.

Yes, they're really special. I think that just about sums up the attitude. Reminds me of a certain investment forum in the 2000's.

The price paid by every investor is relevant, both to the market in aggregate and to that individual investor, whether passive or active. It may be a drop in the ocean but there is no ocean without drops.

At any given point in time there is only one available price to buy or sell at. That is true whether talking about an individual security or an entire market via an index (fund).

Now you may like that price or you may not like that price. But it doesn't matter either way because if you want to buy that holding then that is the price you have to pay.

You do have a choice of course. You can refuse to buy and stay in cash. But then of course you miss out on all the profits from being invested in the market.

So what you seem to be advocating here is some form of market timing. And history and experience indicates that nobody can consistently profit from going in and out of the market, although it can be fun trying. And since the stock market goes up a lot more than it goes down, trying to be clever by trading in and out can be an expensive mistake.

[Charlottesquare]

Not to take anything away from SH, but this is a classic example of survivorship bias. I remember a lot of similar schemes on TMF that ended in poor returns or worse (Lloyds, Marconi, to name but a couple). No-one posts about those ever, let alone decades later.

Agreed, but there's more to it than just picking the one share.

What had been identified by a group of us on TMF in the early 2000s was a systematic undervaluation of smaller companies' oil reserves by the stockmarket and the slow response of the market to new discoveries and reserve upgrades. Not just for a few companies but for the entire sector. This sort of thing shouldn't happen according to efficient market theory (the intellectual underpinning behind tracker funds), but does nevertheless. In addition to the usual array of financial professionals, some of us had considerable experience in the oil industry which helped tremendously.

Quite a few of us regularly met up at AGMs (particularly Soco) and investor events such as Oil Barrel. Soco wasn't the only money maker, though it was the best known (and most envied). Small (and not so small) fortunes were made on many other oil companies such as Dana Petroleum, Encore Oil, Tullow Oil, Dragon Oil, Aminex, Northern Petroleum, etc. (I've only mentioned the ones I made serious money on but there were many more). It wasn't quite like shooting fish in a barrel, but it was pretty close. I've never seen anything like it since, nor do I expect to do so. TLF doesn't have the critical mass of investors and specialists that TMF had and times are different. The other really successful group of investors on TMF was PaulyPilot's action groups.

The wheels started to fall off the wagon with the 2008 financial crisis, but by 2009 lots of us had got out or had seriously downsized our positions. A big trigger for many of us with Soco concerned a poor bad discovery report for a highly anticipated exploration well off the coast Vietnam (ISTR called "Deep E").

As Jim Royle would have said had he been part of the TMF Oil & Gas crowd, "Efficient market theory. My [expletive deleted]!!"

Of course the EMH does not need to price "correctly" all the time, and sometimes the time period where markets misprice can be very long , all the EMH does require is an eventual broad reversion to some fundamental valuation . If no noise/fads/bubbles there would be no market as everything would be considered perfect so why buy or sell.

And of course the EMH is more than pricing efficiency anyway, it does consider more than mere share prices.

It also allows for there to be fads and bubbles impacting pricing. Critics maybe expect a perfect model, not sure EMH ever claimed to be that, but without some market distributing information there likely would be no market at all.

(Samuels, Wilkes, Bradshaw, "Management of Company Finance" 6th edition , pages 385-419 although dated does cover in the round a lot of ground re pluses/minuses/tests etc)

[GeoffF100]

The price paid by individual passive investors is irrelevant.

Yes, they're really special. I think that just about sums up the attitude. Reminds me of a certain investment forum in the 2000's.

The price paid by every investor is relevant, both to the market in aggregate and to that individual investor, whether passive or active. It may be a drop in the ocean but there is no ocean without drops.

Quoting a sentence out of context is not helpful. It is not relevant to what I was saying, but it is relevant in other contexts.

[vand]

There is nothing new in this that we don't know about, but it's a decent recap, anyway:

Laura Foll - Finding opportunities among the UK’s largest companies
https://www.youtube.com/watch?v=joJwND3VF6g

- UK is (still) abnormally cheap compared to global
- 10yr forward returns have correlated well with current valuation; on this basis you could expect the UK to materially outperform the US over this timeframe
- foreign takeovers of many of our stocks are indicative that the value is being recognised

They also discussed it on a recent episode of FT's Money Clinic - the general skepticism that the UK could outperform going forward despite its lowly valuations, to me, was a good contrarian sign that we are pretty much at contrarian levels and will get some mean reversion.

[1nvest]

There is nothing new in this that we don't know about, but it's a decent recap, anyway:

Laura Foll - Finding opportunities among the UK’s largest companies
https://www.youtube.com/watch?v=joJwND3VF6g

- UK is (still) abnormally cheap compared to global
- 10yr forward returns have correlated well with current valuation; on this basis you could expect the UK to materially outperform the US over this timeframe
- foreign takeovers of many of our stocks are indicative that the value is being recognised

They also discussed it on a recent episode of FT's Money Clinic - the general skepticism that the UK could outperform going forward despite its lowly valuations, to me, was a good contrarian sign that we are pretty much at contrarian levels and will get some mean reversion.

UK large caps (FTSE100) have been a relative drag, US large caps (especially the Magnificent 7) have pulled their index up. Compare US and UK midcaps and there's been more alignment (some UK lag since the Brexit vote).

UK rules are too dynamic for comfort, repeated U turns and government musical chairs. The UK is also about to enter a 5 year period where the majority relatively poor (on benefits) get to define where the public purse is loaded from and spent.

More a case of private equity tending to do well, cream off the top. France for instance saw energy prices rise just 50% compared to the UK's 300%, UK citizens helped subsidise the French, same for water, and rail etc. A tendency towards profitable UK ventures to de-list from the UK and to relist elsewhere. Very poor UK governance doesn't look like it will change anytime soon, if anything - worsen.

[vand]

There is nothing new in this that we don't know about, but it's a decent recap, anyway:

Laura Foll - Finding opportunities among the UK’s largest companies
https://www.youtube.com/watch?v=joJwND3VF6g

- UK is (still) abnormally cheap compared to global
- 10yr forward returns have correlated well with current valuation; on this basis you could expect the UK to materially outperform the US over this timeframe
- foreign takeovers of many of our stocks are indicative that the value is being recognised

They also discussed it on a recent episode of FT's Money Clinic - the general skepticism that the UK could outperform going forward despite its lowly valuations, to me, was a good contrarian sign that we are pretty much at contrarian levels and will get some mean reversion.

UK large caps (FTSE100) have been a relative drag, US large caps (especially the Magnificent 7) have pulled their index up. Compare US and UK midcaps and there's been more alignment (some UK lag since the Brexit vote).

UK rules are too dynamic for comfort, repeated U turns and government musical chairs. The UK is also about to enter a 5 year period where the majority relatively poor (on benefits) get to define where the public purse is loaded from and spent.

More a case of private equity tending to do well, cream off the top. France for instance saw energy prices rise just 50% compared to the UK's 300%, UK citizens helped subsidise the French, same for water, and rail etc. A tendency towards profitable UK ventures to de-list from the UK and to relist elsewhere. Very poor UK governance doesn't look like it will change anytime soon, if anything - worsen.

So you're saying that sentiment is low, then?

[1nvest]

So you're saying that sentiment is low, then?

Parliament repeatedly induces much harm, with choices of a backstabber and a Berkeley Hunt, or a U turn spinner directed by the poor, many feel that they have no representation nor is inward investment anywhere near attractive compared to the alternatives. Many I feel will simply not vote Con to instead waste their vote on others that have no chance, or simply abstain. Lab will rejoice at the large majority they have that enables them to implement even their most wildest dreams (extremes). Yes sentiment is very low. Isn't the rich list out soon, and I believe many formerly on the list will have .... disappeared to elsewhere.