Whilst UK fund purchases may have declined, we highlight several companies we still think deserve your attention.
Best of British stock tips
From fish and chips on the beach, to strawberries and cream at Wimbledon, Brits will be embracing quintessentially British traditions this summer, but our research shows investors have sent their UK portfolios packing. With this in mind, we’ve picked some British stocks that we think are worth sticking around for.
Since the beginning of 2016 it is estimated investors have withdrawn more than £18bn from UK equity income funds in particular, a sector that generally focusses on large, multinational and reliable dividend paying companies. Concerns over when and how the UK will leave the EU appear to be underpinning this broad trend; this uncertainty, coupled with an unpredictable political environment, means investors are allocating their money elsewhere.
To examine this trend, our analysts evaluated trades made in the first five months of both 2018 and 2019, which indicated that investors are purchasing less UK focussed funds and instead preferring globally orientated funds. The number of global funds purchased has increased by over a fifth (23%) with the value of these increasing by nearly 95%. On the other hand, the number of buys of UK funds has fallen by over 17% with the value of these also falling by a third (33%).
One of our analysts, Graham Spooner highlighted Brexit; “In light of Brexit I’m of the opinion that investors have been casting their eye overseas a little more in order to increase diversification”. Helal Miah is in agreement: “Other short term factors such as weaker sterling means investors will seek a more international portfolio to diversify away the home country risk”.
However, the outflows from UK funds could create opportunities due to UK stocks becoming unloved and undervalued by the market, especially compared to the US. The downward pressure this puts on some share prices may be deemed to create an appealing entry point into good quality UK companies for investors.
With the iconic British event; Wimbledon getting under way today, we’ve chosen some Grand Slam Best-of-British companies investors can look to if the British economy aces it.
For Marstons, heightened consumer confidence should boost sales for this long established brewing group which has been growing its food offering recently.
The banking sector has remained under pressure recently but Lloyd’s business is predominately UK focussed; it’s the biggest mortgage provider in Britain and is geared to the housing market so any pick-up in the UK economy would likely impact positively.
Progress on strategic initiatives, acquisition of Wagamama and strong industry presence may help Restaurant Group bounce back from a hard year. With healthy eating becoming more prevalent and a number of competitors struggling, there is potential for growth.
Britain’s largest third party logistics company Wincanton looks set to continue delivering a strong service game to some of the world’s most admired companies, where e-commerce is becoming more and more prominent.
Ocado’s joint venture with M&S puts it in a robust position to transform online grocery shopping in the UK, add to that 11.2% growth in revenue and the company has come out swinging in 2019.
Direct Line Insurance has a diversified product and channel portfolio enabling them to meet their customer’s needs now and in the future. Investments in technology and digitisation should also help them gain the upper hand, along with yield attractions enhancing its centre court positioning.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.