I have read many articles this week claiming that the UK stock market is ‘dying’. Amidst many struggles, financial experts London Stock Exchange A graveyard of unloved and unwanted British stocks. i disagree!
UK stocks lose support
Among global investors, UK stocks have significantly declined in importance this century. In 2000, the UK stock market accounted for one-tenth of the global stock market valuation. Today, that percentage he has dropped to 4%.
In addition, the number of companies listed in London is declining. In January 2015, 2,429 UK shares were listed in London. By January 2023, this total had plummeted to his 1,945 and the trend was inexorably downward.
what’s happening?
First, many companies choose to list in New York rather than London. In the United States, stock valuations are consistently high, the market is deep and wide, and liquidity (the ease with which stocks can be traded) is excellent.
Given that the US market is so huge, this is not surprising. In total, US stocks today are worth over $40 trillion, while UK stocks are worth $2.5 trillion. In other words, the US market is 16 times bigger than her in London, giving companies access to a huge pool of investors and liquid capital.
Second, the London market has been described as a ‘graveyard’ or ‘museum’ of legacy, old-world and low-growth companies. On the other hand, the United States is seen as follows. of It’s the place for innovative, fast-growing, loss-making growth companies (especially technology companies).
The third reason for London’s ‘de-equitization’ is corporate takeovers and share buybacks. Over the past three years, too many high quality UK listed companies have been unsuccessfully acquired by foreign investors. Meanwhile, many UK companies are using cash flow to buy back shares to further reduce their share base.
A fourth reason is the Brexit vote to leave the EU in mid-2016. While in the EU, Britain was able to trade freely with her 450 million other European citizens. Some believe that Britain is now an island nation of her 68 million people, with high taxes and onerous corporate regulations.
Fifth, executive salaries are very high in the US, which is great for company bosses, right?
Doom, Darkness…and Boom?
To me, UK stocks may not be as loved and wanted as they have been in my 55 years. As a result, today it trades at a conservative rating.
for example, FTSE100 The price/earnings ratio is around 12 and the earnings yield is 8.3%. again, dividend yield It’s about 3.8% per annum, covering about 2.2 times the profit. To me, this seems too cheap, both historically and geographically.
Of course, I admit there is a lot of FUD (Fear, Uncertainty and Doubt) surrounding the UK economy and the risk of recession. However, as a seasoned value investor, I am drawn to cheap value/dividend/income stocks.And FTSE 100 and FTSE250 index.
As a result, since late 2021, my wife and I have reduced our exposure to overpriced US equities and invested more in undervalued UK equities. In fact, if you look at her Footsie today, you’ll see a wide range of undervalued UK stocks in sectors such as banking and finance, energy, mining and telecoms.
#buy #dying #stocks #would..
