Between the US midterms and the market volatility that followed, the pricking of the AI bubble, the capitulation of the oil price and Nvidia boss Jensen Huang’s amorous dalliances with a suspected Chinese spy, it is difficult to know where to look at the moment.
At such times it is not such a bad exercise to anchor yourself in value. And there is not much better value to be found than on our own doorstep.
So we return to one of the running themes of this letter: Bargain Britain. UK stocks trade on about 12x forward earnings. The S&P 500, by comparison, is on 18x. That means British companies at “33% off”. They’re on sale.
This has been the case for some time. But, as we identified in the summer, the value has now been spotted, and British stocks have seen something of a takeover frenzy.
Back in August we identified seven profitable companies with good business models offered on the cheap. They might get taken out. If so, great. Pop open the champers. But even if not, they were still compellingly cheap, and would make a fine addition to any portfolio.
Three months on, four are comfortably in the black, one up 37% and another up 27%. Two are flat. And we have one loser, down 4%, which, to be fair to myself, is the one where I said the chart was too ugly to add to.
The average gain is about 13%, before dividends. Not bad at all given what’s been going on elsewhere. Today we check in on the trade and ask: what next?
I have a new favourite. Well, two actually.
