At the end of this year, most investors are reviewing their portfolios due to rising inflation. The 60/40 scheme can fail its adherents, so now the eyes of the entire stock world are riveted to the blue chips of the United States. However, experienced traders are now looking at other markets.
Britain is now considered one of its most promising markets. It has become a clear leader thanks to a rare combination of cheapness and quality of its leading assets by industry.
"The UK remains cheap and unloved," analyst Alex Wright wrote in a report on Tuesday, adding that retail traders and investors have received about 1.3 billion pounds ($1.7 billion) from the country's stocks this year.
He believes that the updated data confirmed the strong prospects due to the COVID-19 vaccine deployment program and the removal of uncertainty regarding Brexit.
Meanwhile, Liberum Capital Ltd. said that UK stocks, which have lost to European and American benchmarks this year, offer the best combination of value and growth worldwide.
"It's rare to find a cheap and fast-growing market," strategist Joachim Clement wrote on Tuesday. According to him, analysts expect that the profits of British companies will grow by about 43% over the next 12 months - almost three times the expectations for the United States. At the same time, the total book value (estimated) lags behind the United States by 63%.
Fidelity and Liberum, perhaps, follow in their investment policy the specialists of JPMorgan Chase & Co., who last month recommended investors to pay attention to British stocks - for the first time since the Brexit vote in 2016.
Of course, British stocks lag behind the regions of Europe and the United States, partly due to tensions in trade relations, but the UK market looks "close to record cheap."
Which companies should you target?
Look at the companies that have taken restructuring actions and managed to survive the troubles of the last two years, watching how competitors left the market because of the pandemic.
Companies that are planning mergers and acquisitions are a good target. Experts note that in 2022, British entities will continue to consolidate, which is facilitated by low prices.
Interestingly, the favorites among British companies are not high-tech, but representatives of traditional production – automotive industry, equipment, pharmaceuticals.
For example, Ashtead Group Plc has greatly strengthened its position as the UK's top-performing blue-chip stock. The second quarter showed a significant increase in its share of equipment in the US rental market. Shares of the London-based firm rose 4.8%, increasing growth in 2021 to about 85%.
This is much more than the growth of 13% since the beginning of the year for the benchmark FTSE 100 index, the next best indicator of which is the cybersecurity company Darktrace Plc, which showed an increase of 71%.
At the same time, Darktrace itself leaves the FTSE 100 after a short period of work due to a sharp drop in shares.
Ashstead, an owner of the American equipment rental company Sunbelt Rentals, reported a 20% increase in half-year rental income compared to the same period last year. For the period ended October 31, the company opened 58 new outlets worth $ 1.63 billion due to investments in existing sites and additional acquisitions.
It also means that Britain's exports will grow next year, pushing up the pound sterling.
And yet, in 2022, it makes sense to be more careful when choosing goals, because UK incomes face risks due to supply chain problems and inflation, and the UK housing construction sector may suffer.