This is the second short excerpt from last week’s virtual event.
You can also watch Wright explain how the UK profits recovery is not being fully reflected in share prices.
If these whet your appetite, you can watch the whole one-hour ‘Big Broadcast’ in which the fund manager discusses the opportunities in the UK stock market and answers viewers’ questions.
Can’t watch now? Read the transcript
So developed markets, globally, because of the low level of interest rates, the high level of savings built up through Covid and also, particularly the fact that people are spending more time in their homes than they’ve ever done in the rest of their lives, over the last 18 months has really made people reassess what they want from their housing and generally, that means they want a bigger house with more space. So, transactions and prices are up globally. That was very quickly reflected in the US, as you can see Lennar (LEN.N) and Vistry (VTY) both trading off very quickly on the uncertainty, as lockdowns came in, in March 2020, but come April, those trends were recognised and Lennar is up over 80% since the start of 2020. Whereas Vistry, a stock that we purchased in the summer of last year, along with Redrow (RDW), another UK housebuilder we purchased, that was still down 60% from the start of 2020 when we purchased it.
Yes, the stock has now more than doubled, but still not to where we were at the start of 2020 and earnings are quite a bit higher than they were at the start of 2020. So actually, that stock has done well, but it’s actually got cheaper over this two-year period, despite a very like for like stock, with very similar projections in the US having close to doubled. So, I think that’s the real disparity that excites me about the difference between the UK and the US is that actually, similar stocks with similar fundamentals are just much more cheaply valued here than they are in the US. So again, we have two more examples here. Best Buy and Dixons, very similar business models and trends. Strong outperformance of Best Buy (BBY.N) and the, Inchcape (INCH) is a real case in point.
Inchcape is quoted in the UK, but only has about 5% of its business here. Actually, it’s biggest markets are Australia, Hong Kong, Singapore and Ethiopia. So, it’s a global motor distributor, whereas CarMax (KMX.N) is a US-based motor distributor. Again, CarMax bounced back very strongly as demand and margins have been very strong. Whereas, at the time of purchase, again in the summer of last year, Inchcape was still down 40%. Now, it has caught up some of that performance and is now trading above where it was in 2020, but again, that’s because the earnings have come through. The company is actually, on a lower valuation in terms of its 2022 valuation, than it was at the start of 2020 and still lags the US peer by about 20%, despite it being very much an international, not a UK business.
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