This is the first short video excerpt from our virtual event with Fidelity Special Values (FSV ) fund manager Alex Wright last week.
If this whets your appetite you can watch the entire one-hour ‘Big Broadcast’ (plus transcript).
Can’t watch now? Read the transcript
This talks about, how does the UK market look compared to other global stock markets? You can see here, on the left-hand side, the valuation of the UK market, compared to the US or the Eurozone. So historically, the UK market traded at a 10% to 20% discount to the US, but over the last five years, that’s consistently opened up, so that we’re now at close to a 50% discount to the US market. Then, if you just look at the Eurozone, this is the market that the UK has more in common with in terms of its makeup and generally, the UK market traded roughly in line with that market, but again and it’s been a big opening up over the last three years, in particular, to about a 25% discount. If you see what that looks like in terms of comparison to the valuations of those major markets on the right-hand side, you can see of major markets, globally, the UK is one of the cheapest, only really Italy and Korea being cheaper. Then, if you look at the ten-year ranges of those markets, so where those markets traded in valuation terms over that period, you can see that almost all of the markets are more expensive than they’ve been at any point during the last ten years. Whereas, that’s very much not true for the UK market. Actually, it’s really at the bottom of that blue bar. So, in terms of one of the cheapest levels, in absolute terms for the UK market. So that gets me very excited from a valuation point of view, but what’s also important is what’s happening to the earnings or the profits of companies in the market. I think particularly, in the Covid recovery, that’s somewhere the UK has also particularly shone. So, if you look at the last page-, the next page, sorry,
You can see what’s happening to earnings, what happened in the crisis. So, the UK was particularly badly hit by the Covid crisis, but the rebound in earnings has been stronger than any of these other markets. So, UK earnings rebounding circa 50% this year, compared to more like only 25% in the US and 35% in Europe. So yes, the UK was badly hit, but we’ve also bounced back very strongly. So actually, the valuations-, while the UK market has marginally outperformed actually, the US over the last 12 months, actually, it’s continued to get cheaper versus all of those markets because it’s been the earnings that have really powered that outperformance.
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