UK markets have dared to continue moving higher as we move into spring 2023. Confidence is fragile and Mr Market will run and hide if a central banker goes BOOOO, but the fact remains that equities are in positive territory for the year.
As we near the halfway point of 2023 (madness!) two points stand out to us:
- Quality is shining through. We have said it before, and we will say it again: in difficult economic times the best way to manage risk is to invest in only the highest quality businesses and to be razor-sharp on demanding balance sheet strength. Shares in such businesses were unjustifiably hit from Q4 2021 to the end of 2022 and they are now bouncing back with gusto. To pick a few names that we are shareholders in year-to-date:
- JD Sports +29%
- Auto Trader +25%
- Halma +20%
- Berkeley Group +20%
- InterContinental Hotels +19%
The list goes on. Were you buyers in the panic of last year? It is not too late – these businesses have decades of growth to come.
- Takeovers are coming. The bid for Dechra Pharmaceuticals (a holding in our UK Growth Fund) by Scandinavian PE house EQT was opportunistic and clever on their part. If successful, EQT will get their hands on a unique British business at a fraction of its intrinsic value. EQT are thinking in decades, while the market is thinking in quarters – UK investors need to buck-up their ideas and support management teams to invest for the long-term or else we (the London market) will lose more Dechra’s.
We remain optimistic about the returns on offer for patient and enterprising investors in UK markets. Fortune favours the brave.
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.