At 1825, we work with a variety of investment managers to make sure there is a broad range of expertise available for our clients to benefit from. In our Newsroom we’re keen to share the latest views and insight from investment specialists across the industry to keep you up to date and informed. In this article we’re featuring the views of revered investment manager Neil Woodford.
Undervaluation equals opportunity
As the UK general election looms followed by further elections in Europe, Neil explains that the outlook for the UK economy is better than share prices suggest and he is returning to parts of the UK market that have been out of favour for some time:
“My investment approach may often appear contrarian, though I don’t go out of my way to do the opposite to the market. Often, however, I find myself drawn to areas of the stock market that have fallen out of favour – investor antipathy towards certain stocks or sectors becomes embedded in valuations and it is that undervaluation which sparks my interest.”
Politics, prices and positivity
Recently, Neil has seen value emerging in parts of the market that have fallen out of favour, in part, as a result of last year’s surprise outcome to the European Union (EU) referendum:
“I believe that the market consensus has become far too cautious about the outlook for the UK economy since the Brexit vote and that has had a significant impact on the share prices and valuations of a number of domestically focused businesses.
“I am more optimistic about the prospects for the UK economy now than I have been in many years – we are seeing a strong labour market with record levels of employment and importantly, a banking system which now appears to be largely repaired, as evidenced by the recent pick-up in lending. I don’t think the outlook for the domestic economy is anywhere near as bleak as market valuations seem to imply and this view has been fortified by Theresa May’s decision to call a snap general election. In my view, the outcome here should set the scene for a prolonged period of economic and political stability in the UK.”
Back to builders and banks
All this means that Neil has been keen to take advantage of the compelling opportunity that has opened up in attractively valued, high-quality domestic cyclical businesses:
“This has included revisiting parts of the market which I have not been invested in for many years, including house builders such as Taylor Wimpey and Barratt Developments, and banks such as Lloyds.”
If you’re interested to read more on the outlook for the UK and other markets, you’ll find topical insight in the monthly updates from Andrew Milligan, Head of Global Strategy at Standard Life Investments. We’ll also keep you updated with special features on the UK general election. In the meantime, if you have any queries about your investment strategy your 1825 Financial Planner will be happy to help.
This blog and any responses to comments should not be regarded as financial advice.
Content in this section is provided by Woodford Investment Management Ltd. It does not constitute any financial or other professional advice or recommendations. Content from external fund groups does not represent the views or opinions of Standard Life group.