It seems that in 2022, we are being inundated with bad news on a daily basis.
If it is not Putin's atrocities in Ukraine or the threat of ever rising interest rates, it is what the media has christened the ‘Cost of Living Crisis' with UK consumer confidence at the lowest levels since the 1970s.
Investors have been rattled and in recent meetings that we have attended, there seems to have been very little appetite to be brave and to buy this market.
While we do not want to bury our heads in the sand and deny that it is a tricky economic environment out there, we believe there are good news stories coming from UK-based businesses where the underlying business performance is much more optimistic than one might be led to believe by the grim economic headlines being fired at us all.
Here are three examples of UK-based businesses across different sectors, all of which are performing strongly and getting on with business:
The iconic pub company, which owns and runs freehold pubs across London and the Home Counties, reported its annual results last week.
Trading improved through the year, remember that we were not even allowed inside a pub until summer 2021, and over the Easter period sales were a whopping 39% ahead of 2021. CEO, Patrick Dardis, noted: "The Easter sunshine was a real boost, with some record weeks. We are looking forward to the extended Jubilee weekend where we hope to break more records. Young's are firmly back in business."
Meanwhile, the Young's share price is down 20% this year, reflecting macro-economic worries and, in our opinion, not representative of strong company performance at all. We have been steadily buying up Young's shares all year and are confident that they are indeed ‘back in business'.
On to technology: Softcat, the leading IT supplier to small- and medium-sized businesses across the UK (e.g. they are the largest distributor for Microsoft, Dell, Cisco), reported in May and upgraded its guidance. The business delivered double-digit revenue and profit growth. The company said it expects to deliver "ahead of previous expectations".
Shares in Softcat are down 22% in 2022 - a clear buying opportunity to us.
Cranswick is the white-label producer of pork and chicken for most of the UK's largest supermarkets. For example, the sliced ham that you get from Tesco and Sainsbury's are both produced by Cranswick. They had their annual results on 24 May and said that despite "unprecedented industry wide labour and supply chain challenges", they managed to maintain flat margins and grow the top line.
It is interesting to see their CEO emphasising the importance of management teams that look out for all stakeholders during trickier times, saying: "It is at times like this that partnerships and cooperation come to the fore and I would like to thank all of our stakeholders for their support during this very demanding period".
As with Young's and Softcat, Cranswick shares have been hit this year. In our opinion this does not reflect the growth of the underlying business and is instead driven by macro concerns.
There are many other examples of businesses that are sticking to their knitting and in fact delivering remarkably strong results despite trickier trading conditions. We see this market offering a good buying opportunity to long-term investors and have been adding to investments across all of our UK equity funds.
First seen in Investment Week.
The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.
Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.