American investors have been encouraging British investors to take advantage of the bargains available in UK stock markets. While this message has not yet inspired British investors, some analysts are suggesting that now is the time to reconsider. The bid speculation surrounding BP, the fifth largest member of the FTSE 100, could be an indication of exciting opportunities on the horizon as inflation and interest rates stabilize. BP shares are currently priced at 499p, and influential oil sector analyst Michele Della Vigna at Goldman Sachs recommends buying the shares and has set a target price of 640p.
The belief that UK investors overlook domestic companies in favor of glamorous US tech giants and other S&P 500 index members is widespread. Alec Cutler of Orbis, a fund manager, argues that many UK companies would have twice their current market value if they were listed on the S&P. It is important to note that less than a quarter of the revenues of FTSE All-Share companies are generated in the UK, emphasizing the global nature of these markets.
Despite these positive outlooks, some experts express pessimism about the prospects for UK markets due to government dysfunction and a decrease in the number of companies going public. Charles Hall, head of research at Peel Hunt, argues that private equity takeovers of British tech companies and low valuations are contributing to the shrinking of UK markets. David Coombs, head of multi-asset investments at Rathbones, adds that a lack of innovative thinking from the government and increases in corporation taxes are holding back share markets.
However, major US financial institutions continue to view the UK favorably. Morgan Stanley previously stated that UK shares were the cheapest globally and poised for recovery once inflationary pressures eased. Goldman Sachs estimates that leading UK companies provide a 6% return for shareholders. The decline in British shares in UK pension funds from 40% to 4% in the past two decades highlights the increasing American presence in these investments.
British companies like Diageo, which owns brands such as Johnny Walker and also includes tequilas like Casamigos, are attracting American investors. These companies often have influential US shareholders, including Warren Buffett, the renowned fund manager of Berkshire Hathaway. While some investors do not expect an immediate turnaround, they believe that the American presence could have a significant impact on these businesses. For example, Nelson Peltz, an activist investor from New York, is now on the board of Unilever, which produces popular brands like Dove, Domestos, and Ben & Jerry’s.
Despite this optimism, it is important to note that most analysts consider Unilever a hold rather than a buy, highlighting the divided opinions about UK markets. Some investors, like David Coombs, choose to invest in government bonds rather than shares due to a lack of undiscovered value in the market. However, others, including the author of the article, have been backing Britain and investing in companies like Diageo and Marks & Spencer.
In conclusion, while British investors have been hesitant to take advantage of the bargains in UK stock markets, analysts are encouraging them to reconsider. The bid speculation surrounding BP and positive outlooks from major US financial institutions indicate potential opportunities. However, pessimism about the prospects for UK markets persists due to government dysfunction and a decrease in the number of companies going public. The presence of American investors in British companies suggests that they could have a significant impact on their strategies and performance. Despite the divided opinions, many analysts believe that the UK markets have potential, and it may be worth considering these opportunities.
More detail via Daily Mail Online here… ( Image via Daily Mail Online )