Captain Contrarian: FTSE 100 – it's time for a rethink


#1

Originally published at: http://whichinvestmenttrust.com/captain-contrarian-ftse-100-its-time-for-a-rethink/
Warren Buffett famously said “Be fearful when others are greedy and greedy when others are fearful”. Now that the FTSE 100 has come back all the way to where it started in 2014 (unlike UK mid-caps that still have registered strong gains), it’s time for a fresh look. As the chart shows, UK fund managers…


#2

I agree with this, the FTSE 100 is looking cheap, even BP after their deal in the USA and Shell is bloody cheap too.

I have a few shares of large Footsie companies, Diageo, Next etc, should I buy Shell or BG Group direct of buy a fund/trust? I need to think on this one.


#3

I have a few shares too @jonno but going forward I’m buying trusts/funds because I don’t dedicate enough time to monitoring individual companies myself.

What I’m happy to do though is a put in a bit of effort to identify good fund managers and let them run with it.

If you put in the effort to research shares and keep up with developments with the businesses then shares might be the way for you to go, otherwise I’d suggest trusts or funds.


#4

City of London investment trust has a big part of their money in the FTSE 100. I’ve held it for a number of years. It’s not the most exciting trust but it is stable, cautious, and its been increasing its divided for zillions of years.

Also, Finsbury Growth and Income, Nick Train’s trust has a lot of its money in the Footsie too.

Two great options I think.


#5

i didn’t think i really understood those charts but I do see that the FTSE 100 is much less valued than the 250 mid cap.

I think moving to the bigger companies is a good idea @sandradore and I agree with both your suggestions for investment ideas.

Personally, I was hoping for a bit more movement in reaction to Greece but I am sure it will happen at some time and I will hold off buying anything until it does. I mean, come on this is the Summer time when markets go a bit wobbly anyway no?


#6

Reaction to Greece has been minuscule. If you believe today’s FT though then Greece is heading for an exit so your wish for volatility might come true @andre.

In to the FTSE 100, I’m been saying for ages that it’s cheap. I sold my Schroder mid cat trust to put money in to the Footsie.

The other areas that are looking cheap to me are LatAm and EM. If yer patient then you can buy on what is definitely a cheap price but will be a volatile ride that should come good in the end.


#7

I thought LatAm (Latin America I assume?) was doing badly because they make their money from oil and mining both of which are in the doldrums?

And Latin American and Emerging Markets are both going to suffer badly because of America ending QE?

If this is true wouldn’t it be best to wait and see what happens when QE ends.


#8

Well what we can say is they (Latin Americana and the rest of Emerging Markets) are cheap right now. They may well become cheaper, we don’t know.

I reckon the end of QE and rising US rates are already in the price because the market knows, or at least expects that this is coming.

All I’m saying is if you have a long term investment horizon then now is not a bad time to consider investing in these regions, via an investment trust at potentially a double discount (a trust on a discount plus a cheap underlying stock market).


#9

There is value in small companies as well as the largest but I agree the mid cap is looking mighty dear.

I like the new Miton small companies trust and there is another from River Mercantile but I don’t know much about that.

Also, the GLI and P2P trusts are looking interesting.


#10

I’ve been buying MRCH Merchants IT recently, on a 5% yield, stuffed full of FTSE 100 companies. I haven’t got much in midcaps or smallcaps at all at present.


#11

Oh yeah I forgot about Merchants @rogerdecrecy . It is a good yield though they have a lot of gearing too.

Be an interesting one for the @whichinvest guys to review maybe?


#12

Happy to add Merchants Trust to our list of upcoming analysis @citygirl @rogerdecrecy


#14

Thanks @whichinvest. Is it cheeky to ask what else you’re working on right now? flushed


#15

Not at all. We’re working on Allianz Technology, and there are shorter pieces on P2P Global Investments, and GLI Alternatives.

Beyond this JPMorgan Indian is upcoming too.


#16

I’m with you @alexbarr A cheeky little contrarian bet on EM whilst it’s cheap doesn’t sound so crazy to me. LatAm I’d have to consider a little bit more but they’re supposed to this growing middle class right? If so then there must be money to b e made in these countries peddling stuff to them.

I kind of like Feet, no not as a fetish, more or the Fundsmith variety. Still on a premium but it’s dwindled a bit.