Asked recently to give some tips on good equity investments, it became apparent to me that favourable opportunities are disappointingly problematic.
We used our insight into the investment appraisal and our analysis of a ‘recession busting’ British industry sector and found that even ‘safe’ FTSE high performers, once an indicator of home grown success stories, are far from straight forward.
Two thirds of FTSE companies are now exposed to global companies and all the uncertainty that they bring.
With Greece and Portugal threatening all around into a quickening whirlpool, how does the private investor feel about investing in the stock market at all? Indeed when institutional investors fall victim to stock market volatility and fall back on Central London Property, it seems to be the time to invest in physical commodities, which gives a return, not just capital growth.
Britain has not recently made a name in physical commodities, so what other opportunities are there that are a better bet than equities? At present, is anything that gives you more than a 5% return worth thinking about?
The days of sweating assets are over
Staycations
Maya Asset Management have clients in a sector which has benefitted from the weak pound, high airfuel and the belt tightening trends of recent times.
These include Holiday Parks; once an outmoded symbol of an unsophisticated British heritage, now seeing a recent resurgence due to the ‘staycation’ phenomenon. Holiday Parks has seen shorter but more frequent (and increasingly impulsive) holidays being taken in the UK.
Those who offer an experience in line with the enhanced expectations of the post Hi-de-Hi generation, can make budget holidays de rigueur. We Brits have embraced the need for austerity with characteristic spirit, and the shrewdest operators offer accommodation and facilities that are a far cry from past utilitarian stereotypes.
Increasingly luxurious holiday homes, lodges, camping pods, yurts and teepees all rejuvenate a sector which has captured the nation's imagination. However, investment opportunities for private investors within the sector do not obviously present themselves.
Many major players are privately owned, so much of the innovation in the sector is being lead by smaller groups and independents. This fragmented area presents very interesting scenarios to corporate investors, where their investment can realise the potential for consolidation and associated cost benefits.
However, the days of sweating assets are over. Investors must find a fund manager with the vision to keep pace with rapidly changing consumer expectations. The holiday park sector may be closed to all but institutional investors, high net worth individuals or pension funds.
You could visit a multimanager offering shapes in a fund, but the scale of fees and multiple commissions somewhat reduces the lustre.
Future re-growth
George Osborne has pinned the prospects for the future re-growth of British companies onto SMEs and Entrepreneurial groups, but it will be the banks who can cautiously reap the rewards.
To answer the question 'where to put equity right now?', we would recommend using the principles which have seen our core businesses experience a recent resurgence. Go back to basics and use street-level instinct, utilising the strategy that Lord Sugar, with characteristic brevity, calls the ‘smell what sells’ test.
Staying in the leisure sector, a trip down any high street or motorway services would lead you to believe that Whitbread is a good bet, notwithstanding their apparent intention to divest of the successful Costa Coffee chain. And mobile phone shops have yet to show any sign of oversaturation.
We only need receive a utilities bill to remind us that this sector still has legs, at least in the short term, so entrepreneurial investors could seek out opportunities with interests in viable redevelopment of the Olympic legacy. For example there are 6,000 homes in the Olympic Village.
The increasing likelihood of insurance for care in old age would lead you to think that there should be some smart money to be made there. Not being experts in equity investment, we are in danger of once more proving that not enough opportunities exist for the private investor in companies attempting to regenerate the British economy.
Whichever attitude to risk objectives an individual investor chooses to use, be it favouring technical analysis, yield or property as investment classes; the fundamental concept remains the same - it is critical that a good portfolio is skilfully balanced.
In our opinion, a long hard look must be taken at how private individuals can access the non-equity alternatives driving growth in today's British economy.
