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Finding Value in Post-Pandemic UK Equities

Written by Contributor, on 23rd Jun 2021. Posted in General

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Because of the pandemic, stock markets have been volatile, but forecasts of an economic rebound suggest that now is a good time to buy stocks and mutual funds.

However, it is entirely dependent on the company you choose to invest in. Prospects have been searching the top 10 best stocks to buy now UK as businesses start showing promise after the Covid-19 strike.

If there is a sustained shift in opinion toward UK equities, it is likely that, just as the negative perspective pulled down the value of all firms, a rebound in UK equities will put many stocks, good and average alike, at higher prices.

This makes it difficult for UK fund managers to build portfolios without owning overpriced assets.

Despite the current welcome news surrounding the industry, Alexandra Jackson, who manages the Rathbone UK Opportunities fund, believes one area to avoid at the moment is hospitality, because there is still a lot of uncertainty about the extent of future demand, particularly in London.

Many of those equities' prices, in her opinion, already reflect positive news for the industry, but not necessarily the continued uncertainties.

With this in mind, Johnson Service Group, a linen supplier to the hospitality industry, is her best bet for getting exposure to the reopening of the industry. She believes the firm will profit from the cyclical rebound, but it also has the potential to expand structurally in the future if the public's attention is drawn to hygiene concerns as a result of the epidemic.

House Building is one of the sectors where Simon Murphy, equity fund manager at Tyndall, sees value right now. He claims that after the uncertainty surrounding Brexit and other political issues is over , investors will once again focus on the sector's structural advantages, such as the long-term housing need in the UK.

He goes on to say that, since the financial crisis, the management teams of the major UK-listed housebuilders have learned not to spend as much for land as they formerly did, and instead have built up land banks that may be utilized for years. This gives us more predictability and less cyclicality than we would have had in the past.

Another investor interested in housebuilders is Alan Custis, UK equity fund manager at Lazard Asset Management. He agreed with Murphy that housebuilders are currently better managed than in the past, and he added that, despite recent share price increase, he does not consider them to be costly stocks in the current environment.

Companies listed in the UK are now 10% to 15% cheaper than comparable companies listed on foreign markets, according to Neil Veitch, equity fund manager at SVM.

However, he adds that when the gap closes and UK large-caps become more expensive owing to the rise in cyclical assets, an investor's best bet would be to transfer into UK small and mid-cap shares, which are less commonly purchased by giant multinational equity funds and can hold their value for longer.

Financial services firms, such as banks and wealth managers, are one sector that Tom Moore, UK equity fund manager at Aberdeen Standard Investments, has been looking at recently.

He claims that firms in the industry would profit from the economy's considerably greater savings rates, which will help bank balance sheets. As part of this money is invested in investment goods, wealth managers and financial services firms will gain.

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