The UK equity market looks very inexpensive as a whole, especially when compared with the US equity market. This observation has been made repeatedly over the past few years, but has not stopped continued underperformance from UK equities. Perhaps it is worth taking a closer look.
First, the main reason the UK index looks cheap is due to its composition: lots of oil stocks, miners and banks trade on low earnings multiples in every market. Also the UK has few “quality growth stocks” including technology stocks.
The few it has are valued around the same high multiples as international peers: for instance, Sage group trades on 36 times last years’ earnings, and Intuit, its US equivalent, trades on 42 times last year’s announced earnings.
Indeed the quality growth stocks in the UK market have generally performed well in recent years alongside similar US stocks: Relx, Sage, Experian, Next.
Having spent most of my career running global…
