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Two winning stocks from Britain’s bargain basement market
UK stocks may linger in the bargain basement, but this gives long-term investors an opportunity to stock up.
Greene King has survived more than two centuries of shocks
(Image credit: ADAM SMYTH PHOTOGRAPER)
"While homegrown shares languish in the doldrums, hit by fears about Brexit and rising taxes, shrewd investors see an opportunity brewing," writes Ian Cowie in The Sunday Times. UK stocks may linger in the bargain basement, but this gives long-term investors an opportunity to stock up.
British shares are at their cheapest valuation compared to international rivals for nearly 30 years, according to Morgan Stanley.
Furthermore, the average allocation of an investment trust to UK equities has halved during the past decade, from 20% in 2008 to less than 10% this year, according to Morningstar. So there is ample scope for stocks to recover as investors rush back in to the British market.
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The reason to expect the exodus to reverse, as Nick Andrews points out in a Gavekal Research note, is that sentiment could flip very quickly "should the market come to recognise that no deal' really won't happen." The negativity has been overdone, with gloomy headlines obscuring the likelihood that the UK is heading for a Brexit deal, or "a lengthy interim arrangement that kicks the can down the road". Once that becomes clear, "expect UK domestically-focused equities to quickly resume a period of outperformance".
Among Cowie's favourites is Greene King (LSE: GNK), Britain's biggest brewer. Whatever shocks may lie ahead, this company, founded in 1799, "will still be selling beer long after I have gone." He also likes a small electrical company that makes kettle safety controls Strix, (LSE: KETL).It supplies half the world's kettles with the mechanism that cuts off the power supply when the water has boiled.A kettle is one of the first things emerging-market consumers buy with their new-found wealth.
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Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.
Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.
Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.
