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TPP midweek commentary:

The rest of the world is slowly acquiring undervalued UK companies.

On Monday City AM released an interesting article about the lack of investment made into domestic companies by UK investors.

It stated that ‘Amateur investors represent a largely untapped pool of capital in the UK – but convincing them to pump cash into the London Stock Exchange may be an uphill battle’.

Think tank New Financial produced a report last month with shocking revelations. The share of households in the UK that directly own stocks has halved in the last 20 years (35% in 2003 to 11% in 2023). In Sweden for example, that number is 22% and on the rise.

Add this to the fact that only 11% of UK households’ financial assets are in stocks, compared to 40% in Sweden, and 39% in the US.

Investors in the UK do not seem to want to engage in their financial investments and the result is that Britain’s market for small and medium-sized stocks is shrinking rapidly, challenging London’s status as an international financial centre.

A lack of initial public offerings, along with a flurry of takeovers by overseas and private equity firms, mean there are more companies leaving the UK market than joining it. The trend is particularly pronounced for the FTSE Small Cap Index, which Peel Hunt says has lost 10% of its members and 20% of its market capitalization this year.

“We are currently in a doom loop, where valuations are low, liquidity is reducing, investors are seeing withdrawals and there is little desire to IPO,” Charles Hall, Peel Hunt’s head of research, wrote in a report. “If this continues, the UK could lose a crucial part of its financial ecosystem.”

While Peel Hunt’s analysis focuses on Britain’s smaller companies, the blue-chip FTSE 100 has also been suffering. London lost its status as Europe’s biggest stock market last November, extending an equity slump that stretches back to Britain’s vote to leave the European Union in 2016; arguably it goes all the way back to the dot com bubble bursting in 2000.

A recent rise in oil prices allowed the UK’s commodity-heavy gauge to regain the crown, but the market is still struggling amid a floundering economy and a trend of companies fleeing to New York for listings.

That includes would-be UK market champions that have chosen to list in the US, like chip designer Arm Holdings, and firms that have shifted their primary listings to New York, like Irish building materials firm CRH. Listings flops for several high profile London IPOs over recent years — including Aston Martin Lagonda and Deliveroo — haven’t helped.

A shrinking pool of stocks weighs on economic growth and investment, and becomes a vicious cycle for investor flows. Peel Hunt’s analysis shows that 27 companies with a market capitalization of more than £100 million have received M&A offers so far this year, mostly from financial buyers or foreign suitors, and may therefore exit the market. Among them are FTSE 250 members Dechra Pharmaceuticals and Network International.

Hall said upcoming regulatory reforms for UK capital markets are welcome, but that attracting investment in smaller stocks also needs to be addressed by reforming taxation measures.

One reason that might explain our downtrodden stocks is the constant barrage of bad news from every media outlet going. We all know that good news doesn’t sell, but surely it would be ok to report some occasionally? Or even just the truth without the bad news spin?

The ever-optimistic Americans can turn any situation around into a buying opportunity.

When stocks are low, they buy the dip and increase their long-term wealth. It’s partly down to having a better understanding of how equity markets work. In the UK our tolerance for risk is much lower and our understanding is much more basic (I’m ashamed to say). When stocks are down, UK investors will walk away, more likely to sell and compound the problem than take the opportunity to buy and increase holdings for long-term investment.

Last month’s figures from Calastone, which tracks money entering and leaving funds from UK-based IFA’s and wealth managers, showed that equity funds saw outflows of £1.2bn.

This was the 6 consecutive month of net selling. UK focussed funds were the hardest hit once again with £740 million being withdrawn.

How do we change an attitude that has been cemented over generations?

Closing Comments:

After an excellent trading period for TPP it will be interesting to see how our strategies position in November.

The tactic employed this year has been predominantly 'buy the dip' and then a few weeks back, our traders switched to the sell side. Watch this previous prediction here.

After profiting on the SELL side, they moved back onto the BUY SIDE before last weeks rally.

Regardless of where the economy (or markets) go from here, TPP will aim to take advantage.

We hope that by building products like TPP that investors will see there are investment solutions out there that can perform regardless of the investment climate.

Why merely track a market, when opportunities can be taken advantage of in the short and mid term?

Adding small short SELL positions as the markets fall is one of many ways our strategies make modifications to consistently beat the markets.

If you're frustrated with what many believe is a stale and outdated wealth management model- then consider arranging a call with our team.

We are also of the opinion that the industry needs revamped, and that wealth and asset managers have no excuses for failing to beat their benchmarks most years.

Investors want more than 4, 5, or 6% per annum, without taking on excessive risk.

Investors are frustrated with the poor performance and excessive fees.

Ladies/Gents- this is the very reason why we built TPP.

TPP has been built for frustrated investors globally. It's time to empower yourself, and start to beat your benchmark.

At TPP we offer a multitude of different strategies and trading techniques- they all have one thing in common. They are all designed to beat their market benchmark. Their track records suggest they will do exactly that. 

It's time for change. No more exposure to underperforming funds, and their inflated fees.

TPP has been built to disrupt the market place and offer investors the solution they've been craving.

Welcome to the future of investing. 😀

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