Quantcast
Menu
Save, make, understand money

Investing

Invest in the UK: The best ways to play the British recovery

Holly Thomas
Written By:
Holly Thomas
Posted:
Updated:
17/02/2014

With the Bank of England revising forecasts for growth in the UK upwards last week, investors might want to take advantage of businesses on home soil that could generate decent returns.

Last Wednesday Bank of England Governor Mark Carney said growth in the UK would be 3.4% instead of 2.8% previously forecast.

While a stock market is not directly linked to an economy, there are companies that will do well.

We ask a panel of experts how they are playing the British recovery:

Darius McDermott, managing director at Chelsea Financial Services

This year UK equities will more than likely retain their top spot, albeit it with a slight twist: smaller companies funds and those that have a bias towards small and mid-caps seem to be the preference so far this year- both for growth and for income. With Neil Woodford leaving Invesco Perpetual, other UK equity income funds are also moving up the tables; Artemis Income, Threadneedle UK Equity Alpha and Rathbone Income being the main beneficiaries.

In terms of stocks, retail ‘survivors’ who now have stronger businesses and more market share as competitors have gone by the wayside are doing well. Majestic Wines, for example, has benefited after Victoria Wines and Oddbins went bust.
Other companies that will benefit from more consumer spending are those like Restaurant Group which owns Frankie and Benny’s that offer an affordable treat.

Tom Stevenson, director of personal investing at Fidelity

The companies best geared to an improving outlook in the UK are probably the mid and small caps but these also have performed best and are now most highly rated.

I am more interested in the more out of favour blue-chips which have underperformed for some time now and are much more cheaply rated. There are also plenty of high-yielding shares in the FTSE 100 which I continue to think look interesting in a low interest rate environment.

Tim Steer, fund manager at Artemis

Companies with earnings based from the UK economy are the place to be. ITV is interesting and doing well with advertising increasing. People are spending more on holidays in an upturn too which means stocks like Tui and Easyjet are likely to benefit further.

Patrick Connolly at Chase de Vere

The road to recovery is positive for the UK stock market. The Old Mutual UK Smaller Companies fund has about one-third of the fund in industrial companies which will benefit from a stronger UK economy.

BlackRock UK Special Situations typically invests about 50% of the fund in mid and small cap companies and again has a big focus on UK industrial companies.

The UK commercial property market tends to have a high correlation to economic growth and is worth considering. We recommend include Henderson UK Property and Ignis UK Property.

While we are positive about the long-term outlook for UK equities, it should be remembered that the UK market has made strong gains over the past two years, with relatively modest earnings growth from companies.

This means that much of the upside in the short-term could already be priced in and, despite an improving economic picture, there remains the risk of a market correction in the short to medium term.

However, long-term investors should ride out any market falls or volatility and could even use it as an opportunity to invest more.

Paul Kavanagh, chief investment officer at Killik & Co

Retail spend is increasing in the UK. Online activity in particular is growing rapidly with 16% more spent in the UK in 2013 over 2012 with predictions of 30% of all retail spending going online by the end of the decade. DX is a new parcel delivery firm due to float that handles 180 million packaged items a year and likely to become more successful as online shopping increases.

Health and fitness is on the up with a concerted move to healthier lifestyles meaning people are willing to spend more on leisure. Cycling is one area in particular that is booming. While at the top end, this is catered for through individual shops, Halfords is strong in this area.

hl-share-fund-account-new