With only 19 days left to use up the rest of your ISA allocation… Should you bet on the rebound in battered UK stocks?
Piggy in the middle: Could UK plc be the best home for Isa’s money this year?
These are disconcerting times for anyone deciding how and where to invest this year’s Isa allocation.
The April 5 deadline is just 19 days away. Still, the collapse of Silicon Valley Bank (SVB), the California tech company’s lender, has sent shockwaves through global stock markets.
Questions arise about the soundness of US, European and other banks. Who would not be frightened by such events?
But the unexpected should be the incentive to reconsider your position on any subject.
The SVB scandal is another sign of the end of the easy money era hitting US tech companies that make up a significant portion of many portfolios (you may hold a lot more than you think).
In light of this, could UK plc be the best home for Isa’s money this year? Such a choice would diversify your portfolio, with a sector for everyone, from construction giants to video games.
Global investment banks are eyeing the UK, but UK investors are selling shares in UK companies. This comes against the backdrop of the other big controversy of spring 2023 – UK-listed groups leaving London for more fame, fortune and shine on Wall Street.
Unpredictably, however, the theft draws more attention to the hidden appeal of UK plc, following improved economic forecasts in this week’s budget.
Alec Cutler, Bermuda-based fund manager of Orbis Global Management, said: “There are many companies listed in the UK that are said to have twice the market capitalization of Wall Street, but the Brits don’t seem to care. “
Cutler cites names such as Balfour Beatty – “the best construction company in the world”, Headlam, the leading European flooring group, and Rolls-Royce, the maker of aircraft engines.
David Battersby of wealth manager Atomos suggests that Isa investors with above-average risk appetite could even exploit SVB’s negative impact on the stock prices of Barclays, Lloyds, NatWest and HSBC, which bought out the UK arm of SVB for £1.
Alexandra Jackson, fund manager of Rathbone UK Opportunities, said: “The UK market is trading at a record 40% discount to the US. Among those bullish on the outlook are companies exposed to US infrastructure spending, such as Ashtead, CRH and Hill & Smith, which we hold in our fund.
Jackson also highlights the opportunity to get involved in the UK’s creative sector, saying: “We have a stake in Team 17, the Wakefield-based video games company which has a catalog of family-friendly indie games.”
Rathbone UK Opportunities is one of my UK plc bets. In my Isa, I hold Jupiter UK Alpha for its spread of big UK names, like AstraZeneca and Drax, the UK’s largest renewable energy provider.
From the start, I have made monthly contributions, rather than committing the entire £20,000 allowance at once. It’s a system that should suit those who are shaken by current circumstances and feel happier entering the markets gradually.
Jason Hollands of BestInvest suggests Murray Income Investment Trust to those wishing to back FTSE 100 names. The trust’s share price is at a 5% discount to its net asset value. Hollands also suggests the Fidelity UK index fund. He adds: “For a more dynamic approach, I like the Artemis UK Select fund which looks for undervalued companies. Managers can also take short positions in companies whose stock prices they believe will fall.
CJ Cowan of Quilter Investors recommends JO Hambro UK Dynamic, which also identifies companies that are “undervalued”. Fund manager Alex Savvides believes the UK market is full of bargains.
The SVB case is expected to put a premium on companies with strong free cash flow (the cash left over after maintaining fixed assets and bearing costs) as opinion turns more against former tech darlings, with their addiction to borrowing and the promises of tomorrow.
This week’s budget scrapped the Lifetime Retirement Savings Allowance. But the right to also save £20,000 a year tax-free in an Isa remains a significant concession. Isa stands for Individual Savings Account. Could this be the year you make a personal offer to support Britain?