Notes on Investec UK Special Situations

The Telegraph published an article today on Alastair Mundy, manager of UK Special Situations fund. (http://is.gd/UQboQf). The key points are: * he likes the food retailers, especially Tesco
* expects large-caps to outperform small caps
* he likes BP, Royal Dutch Shell, Glaxo, HSBC
* he’s looked at Barclays and the mining stocks, but it worried about the latter’s reliance on the Chinese economy
* fund is 10% in cash, reflecting concerns over valuation levels

The market stats produced by Stockopedia show the UKX (FTSE100) on a PE of 18.0, and the MCX (FTSE250) on 16.2. So, despite the phenomenal run of small and mid-cap stocks over the last 5 years, they still appear to be slightly cheaper than the large-caps. Analysts are expecting more EPS growth in the Footsie companies, so its forward PE is 14.9, whilst that of the FTSE250 is 14.6. I expect that analyst expectations of growth are likely to be too optimistic, though.

I was able to compile my own statistics for PERs of various indices from a different source. They are:

AIM 15.64
FLEDGLING 19.89
FTSE100 16.61
FTSE250 15.90
NONE 17.64
SMALLCAP 15.16

Feel free to be suspicious of the way I have compiled my statistics. It is, however, consistent with my prior observation that mid-cap stocks do not appear too expensive relative to large-cap stocks. Mid-caps don’t even appear to be overvalued.

You know, the general consensus is that we are in a secular sideways market that should drag on for another couple of years as valuations compress. But what if that view is wrong? What if, instead, 2009 actually marked the beginning of a long-term secular bull, similar to the early 80s? I’ve never heard anyone else come up with that hypothesis.

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About mcturra2000

Computer programmer living in Scotland.
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