Election impact on investment strategy

[colin]

I am not sure where this idea that the UK market is cheap has come from, but I have heard it from various quarters. CAPE10 is around 16, p/b 1.7. That's average, not cheap. I would agree that the UK market is cheap compared to many other developed markets, such as the US, Japan*, Germany, France, Switzerland, Canada, Australia, etc. But I prefer to think of them as expensive rather than the UK as cheap! A particular problem with the UK market, compared to other developed markets, is that earnings growth appears to have stalled.

For cheap, look to the far east - China, Korea, Singapore, or if you are feeling brave, Turkey and Russia.

*Japan is arguable as it has quite a high CAPE10, average p/e, but the market trades on a low book value.

But how usefull are such valuation methods, do they have enough predictive power to justify investment decissions?
A Vanguard study suggests not.
https://www.businessinsider.com/stock-m ... ?r=US&IR=T

[hiriskpaul]

I am not sure where this idea that the UK market is cheap has come from, but I have heard it from various quarters. CAPE10 is around 16, p/b 1.7. That's average, not cheap. I would agree that the UK market is cheap compared to many other developed markets, such as the US, Japan*, Germany, France, Switzerland, Canada, Australia, etc. But I prefer to think of them as expensive rather than the UK as cheap! A particular problem with the UK market, compared to other developed markets, is that earnings growth appears to have stalled.

For cheap, look to the far east - China, Korea, Singapore, or if you are feeling brave, Turkey and Russia.

*Japan is arguable as it has quite a high CAPE10, average p/e, but the market trades on a low book value.

But how usefull are such valuation methods, do they have enough predictive power to justify investment decissions?
A Vanguard study suggests not.
https://www.businessinsider.com/stock-m ... ?r=US&IR=T

Yes, nothing very reliable. As the chart shows CAPE10 is about the best. P/B not bad either, but for some reason they don't seem to have looked at it. One of them must turn out wrong for Japan!

[johnhemming]

Given that the referendum was in 2016 an average over 10 years would not necessarily be that useful.

Furthermore there are the domestic stocks and those which are international. One would expect to treat them differently.

[tjh290633]

I always find the change in price of a share over the year to be useful.

Here is my portfolio ranked by change since 31 Dec last:

Epic     Change    Yield 
SGRO      47.47%    2.32%
TW.       46.53%   10.71%
MARS      38.22%    6.05%
TSCO      32.19%    2.79%
LGEN      32.16%    5.83%
SSE       30.88%    6.11%
SMDS      29.13%    4.29%
IMI       25.64%    3.54%
BA.       25.13%    3.96%
LLOY      24.14%    5.33%
UU.       23.04%    4.92%
AZN       22.88%    3.01%
BATS      21.56%    6.77%
NG.       21.45%    5.39%
WMH       17.87%    4.70%
BLND      16.69%    5.26%
RIO       15.83%    7.11%
GSK       15.68%    4.59%
TATE      13.61%    4.02%
CPG       11.42%    2.19%
AV.       10.73%    7.45%
ULVR      10.62%    3.13%
DGE        9.16%    2.24%
ADM        7.57%    6.02%
KGF        6.94%    4.96%
BHP        5.24%    6.04%
RB.        0.40%    2.87%
VOD       -4.36%    5.27%
BP.       -6.75%    6.81%
RDSB      -8.74%    6.77%
MKS       -9.55%    5.26%
BT.A     -15.31%    8.14%
S32      -18.59%    4.96%
IMB      -25.74%   12.27%
PSON     -29.67%    2.94%

Av.Chg    12.67%    5.26%

It's those that have fallen over the year which are of interest, as they frequently recover next year.

TJH

[Dod101]

Thanks TJH. Of course your table is very much on the low side given some of the significant rises this morning, so far anyway.

Dod

[richfool]

An interesting table, though currently I am more interested in the next 12 months rather than the last 12 months.

Noting that friday's momentum has continued this morning, I'm pondering if it will continue (particularly) in small and mid caps, into next year, and if utilities will similarly keep going or will they all lose their momentum as profit taking and uncertainty set in.

My addition of Temple Bar (for its exposure to value stocks, - banks, builder's merchants, and builders) has powered on up this morning.

[Dod101]

An interesting table, though currently I am more interested in the next 12 months rather than the last 12 months.

Noting that friday's momentum has continued this morning, I'm pondering if it will continue (particularly) in small and mid caps, into next year, and if utilities will similarly keep going or will they all lose their momentum as profit taking and uncertainty set in.

My addition of Temple Bar (for its exposure to value stocks, - banks, builder's merchants, and builders) has powered on up this morning.

I doubt that TJH can help very much with the next 12 months; as far I know his crystal ball is no better than anyone else's.

I have held Temple Bar for quite a long time and it is about time that it 'powered up', it has nothing much for a long while. I hold it partly for income and partly because Alistair Mundie is a bit of a contrarian and he holds shares that I would not hold directly. Edinburgh has also done well on Friday and again this morning. One thing is for sure; there will be profit taking at some point and once the realities of Brexit and day to day government set in I guess things will settle down again into a more stock specific market. Currently there seems to be the wall of money coming into the market. Overseas money I suppose must be making up some of it at least? It could have some way to go.

I am not keen on any of the utilities as I keep saying. The regulators are being quite tough and I do not see that changing, and of course some of the companies have got none too strong balance sheets.

Dod

[richfool]

An interesting table, though currently I am more interested in the next 12 months rather than the last 12 months.

Noting that friday's momentum has continued this morning, I'm pondering if it will continue (particularly) in small and mid caps, into next year, and if utilities will similarly keep going or will they all lose their momentum as profit taking and uncertainty set in.

My addition of Temple Bar (for its exposure to value stocks, - banks, builder's merchants, and builders) has powered on up this morning.

I doubt that TJH can help very much with the next 12 months; as far I know his crystal ball is no better than anyone else's.

I have held Temple Bar for quite a long time and it is about time that it 'powered up', it has nothing much for a long while. I hold it partly for income and partly because Alistair Mundie is a bit of a contrarian and he holds shares that I would not hold directly. Edinburgh has also done well on Friday and again this morning. One thing is for sure; there will be profit taking at some point and once the realities of Brexit and day to day government set in I guess things will settle down again into a more stock specific market. Currently there seems to be the wall of money coming into the market. Overseas money I suppose must be making up some of it at least? It could have some way to go.

I am not keen on any of the utilities as I keep saying. The regulators are being quite tough and I do not see that changing, and of course some of the companies have got none too strong balance sheets.

Dod

Thanks for the thoughts Dod.

Yes, TMPL does seem to be performing well again, after some time in the doldrums. I do hold several other UK G&I's including MUT (my best performer), TIGT, FGT and Shires. Shires fared less well when we had the falls last December, but I am conscious that it holds fixed interest, smaller coys and some preference shares as well as paying a good dividend yield, so I think I will stick with it for the diversity and yield it gives.

I hold and had topped up Mercantile earlier in the summer, and MRC, along with Standard Life smaller coys (SLS), are both performing very well currently.

So as much as I look around, I can't find anything to tinker with, either to sell, top slice or top up. All is about where it should be. If I was to do so, it would probably be to dispose of one of the UK G&I trusts (perhaps TIGT).

I tend to agree that currently there will be overseas money coming into the UK market and also that in the New Year when various "practicalities" of Brexit and the new government implementing its policies, that things will settle down and probably drop back a bit.

I get my utilities exposure from EGL (Ecofin Global Utilities and Infrastructure trust).

I have also kept my Global and particularly Asia Pacific exposure up.

[Dod101]

IF I had spare cash (which I currently do not have) I would be inclined to buy an infrastructure fund or IT. Good and it appears reliable income.

Dod

[TheMotorcycleBoy]

So now that Election mania has indeed ended, we see, possibly due to an acceleration in progress of Brexit (but politics aside), the GBP starting to fall back, i.e.

https://www.rte.ie/news/business/2019/1 ... -deadline/

What UK stocks do people see as possibly moving back into buy terrorities?

FWIW My current quality UK shares (GAW - Games workshop, MSLH Marshalls plc, SAGE Sage, BOY Bodycote, XPP XP power) are all in silly money land. My current potential watch lists is now including:

Lloyds banking (LLOY)- seem to be gradually falling
Legal & General (LGEN) - seem still pricey
Compass group (CPG) - I'm not really sure what the £/$ does to these guys.

(I'm also looking at TATE and TRI - trifast, but both of these are already rising past my buy range)

Do people see the £ continuing to fall, and UK banks getting cheaper?

Matt

[TUK020]

What UK stocks do people see as possibly moving back into buy terrorities?

Oil (BP + RDSB) looking cheap at the moment, but could go lower.....

Do people see the £ continuing to fall, and UK banks getting cheaper?
Matt

Given that Mendacious Boris has ruled out an extension to the transition period, this will give Jacob Rees Mogg et alia opportunity to come out and practice their eye-swivels, and talk up a hard exit. Pound will probably have plenty of room to go into free-fall.
Sigh

[TheMotorcycleBoy]

What UK stocks do people see as possibly moving back into buy terrorities?

Oil (BP + RDSB) looking cheap at the moment, but could go lower.....

Do people see the £ continuing to fall, and UK banks getting cheaper?
Matt

Given that Mendacious Boris has ruled out an extension to the transition period, this will give Jacob Rees Mogg et alia opportunity to come out and practice their eye-swivels, and talk up a hard exit. Pound will probably have plenty of room to go into free-fall.
Sigh

Thanks TUK,

TBH (you might have guessed from my recent posts on your RDSB thread) I'm leaving oil stocks alone. Anyway I got twitchy just now and topped up CPG. It's been up for less earlier on in the week, but I got bored waiting for my limit list to trigger. As TJH would say the time to buy is now etc. etc.

Yes if GBP falls off a cliff anytime soon I'll look back at the classic income UK stocks in our foli, which are currently LLOY and LGEN.

Matt