With just 19 days left to use the rest of your Isa benefit… should you bet on downed UK stocks bouncing back?
Piggy in the middle: could UK plc be the best place for this year’s Isa cash?
These are nerve-wracking times for anyone deciding how and where to invest this year’s Isa benefit.
The April 5 deadline is just 19 days away. Still, the collapse of Silicon Valley Bank (SVB), the California tech firm’s backer, has sent shockwaves through global stock markets.
Questions are asked about the soundness of American, European and other banks. Who would not be frightened by such events?
But the unexpected should be the spur to reconsider your position on any subject.
The SVB scandal is yet another sign of how the end of the easy money era is hitting the US tech companies that make up a large portion of many portfolios (you may have a lot more than you think).
In light of this, could UK plc be the best place for this year’s Isa cash? Such a choice would diversify your portfolio, with a sector for every taste, from construction giants to video games.
Global investment banks are eyeing the UK, but UK investors have been selling shares in UK companies. This is against the background of the other major controversy of spring 2023 – the UK-listed groups are leaving London for more fame and fortune and Wall Street dazzle.
Unpredictably, however, this flight focuses more attention on the hidden appeal of UK plc, in the wake of improved economic forecasts in this week’s budget.
Alec Cutler, Bermuda-based manager of the Orbis Global Management fund, says: “There are many British public companies that would be double market capitalization on Wall Street, but Brits don’t seem to care.”
Cutler cites names like Balfour Beatty – ‘the best construction company in the world’, Headlam, Europe’s largest floor covering group, and Rolls-Royce, the aircraft engine manufacturer.
David Battersby, of the asset manager Atomos, suggests that Isa investors with above-average risk appetite could even benefit from SVB’s negative impact on the share prices of Barclays, Lloyds, NatWest and HSBC, which picked up SVB’s UK arm for £1.
Alexandra Jackson, manager of the Rathbone UK Opportunities fund, says: “The UK market is trading at a record 40 percent discount to the US. Among those optimistic about the outlook are companies exposed to US infrastructure spending, such as Ashtead, CRH and Hill & Smith, which we keep in our fund.”
Jackson also highlights the opportunity to get involved in the UK’s creative industries, saying: “We have an interest in Team 17, the video game company based in Wakefield that has a back catalog of family-friendly indie games.”
Rathbone UK Opportunities is one of my bets on UK plc. In my Isa, I’m holding Jupiter UK Alpha because of the proliferation of big British names, such as AstraZeneca and Drax, the UK’s largest renewable energy supplier.
From the outset I have made monthly contributions, rather than committing the full £20,000 grant in one go. This is a system that should suit those who are distressed by current conditions and who feel happier entering the markets gradually.
BestInvest’s Jason Hollands suggests the Murray Income Investment Trust for those who like to support FTSE 100 names. The share price of this trust is 5 percent lower than the net asset value. Hollands also introduces the Fidelity UK index fund. He adds: ‘For a more forceful approach, I like the Artemis UK Select fund, which looks for undervalued companies. The managers can also take short positions in companies where they think share prices will fall.’
CJ Cowan, of Quilter Investors, recommends JO Hambro UK Dynamic, which also scouts companies with ‘undervalued value’. The fund’s manager, Alex Savvides, has noticed that the UK market is brimming with bargains.
The SVB affair is expected to place a premium on companies with strong free cash flow (the money left over after preserving capital assets and meeting expenses) as opinion turns more against the former techies, with their reliance on borrowing and jam- tomorrow promises.
This week’s Budget has removed the lifelong retirement savings allowance. But the right to also save £20,000 tax-free annually in an ISA remains an important concession. Isa stands for individual savings account. Could this be the year you make a personal bid to support Britain?