So I am being asked by US investors what picks I have for US investors in the UK markets because I am sure many look at the valuations and end up blinking at how low and out of whack they are with US companies cut from the same cloth.
UK stocks are cheap but it seems that the slumbering FTSE100 is slowly waking up. Here is a chart of the UK’s FTSE 100 and the German DAX index.
The recent bunny hop in the UK index mirrors sudden break outs in other assets and you can see the German market has had a significant acceleration. The penny is dropping that Europe, including the UK has to roll back the Bureaucracy and up the Democracy both politically and economically, to get back on track. If they don’t they face a very unpleasant near future, with the US off to struggle with China and the mad chap in the east ogling their border. Of course it can choose not to get its skates on, but the writing is writ so large on the wall you can see the trend towards Europe getting of its fat comfy derriere and kicking its game into a higher gear.
This I feel is very bullish as long as developments avoid sending capital fleeing for the hills and crashing the whole shooting match in a moment of epiphany.
This is why Gold is already so feisty, but wait.
Well that’s kind of interesting. Of course some will say correlation is not causation, but those that do generally aren’t market operators. Betting against correlation is a road to the poorhouse.
So I would say to US investors, they way to trade the UK is:
Go to your favourite investor site. Pull up all the UK ADRs. Compare and contrast the valuations of the UK versus the US equivalents. Eg: Price to sales, P/E, Dividends and go for the cheapest comparable companies with a solid legacy of stability. You can do the same with Germany and France though the gap between US and German company valuations wont be so stark. You can build up a nice selection of companies begging to be taken over. Then there is an easier way.
The quickest way to put aside a little UK action is the iShares MSCI UK ETF (EWU)
Its not exactly the FTSE 100, but the iShares MSCI United Kingdom, runs pretty closely alongside the FTSE100 and has a lot of the same exposure.
It’s always good to be diversified and with the seismic changes about to kick in for Europe and the UK, it makes sense to sprinkle that spicy US portfolio with some Euro seasoning.