Page 24 - DIY Investor Magazine | Issue 40

‘SUCCESSFUL VALUE INVESTING PROVIDES THE OPPORTUNITY FOR INVESTORS TO ENJOY GOOD LONG-TERM RETURNS’
April 2024 24 “The share prices of UK house builders have been under pressure because people are naturally concerned about
the economic environment and what it may mean for the UK housing market in the near term. On a three-to-five-year view, however, we see very robust demand for housing and limited supply, which should support profits for the industry. The UK DIY Investor Magazine · has a large, growing population, a shortage of housing and a limited supply of new homes coming to the market.
From a medium-to-long-term fundamental perspective, therefore, the UK housing market looks well underpinned and some house builders also possess very attractive financial
characteristics.”
MARKET-BEATING POTENTIAL
Successful value investing provides the opportunity for investors to enjoy good long-term returns. By identifying good businesses and investing in them when they are out of favour, while at the same time avoiding stocks that look overvalued, investors can capitalise on the market’s inherent inefficiency.
Clearly, it’s not without risk. Sentiment can remain against the value investor in the short-term and markets can continue to defy rational expectations for longer than we may expect. But, as Ben Graham said, there is the potential to do well from a disciplined, value investment approach, as the market ultimately focuses on its task of weighing the fundamental attractions of individual businesses appropriately.
Under Simon Gergel’s management, investors have seen
the benefits of his approach represented in a significant
out performance of the UK stock market index. Whilst past performance does not predict future returns, since Simon’s appointment as portfolio manager in May 2006, Merchants shareholders have seen a Net Asset Value (NAV) total return of 6.41% per annum, which compares favourably to the 5.74% per annum delivered by the FTSE All Share Index2.
Simon, and fellow portfolio managers Richard Knight and Andrew Koch, are confident that by deploying the same disciplined approach and a willingness to invest away from the crowd, they will continue to find attractive long-term investment opportunities with the potential to meet Merchants’ objectives.
After all, as another legendary investor, Sir John Templeton once said, “It is impossible to produce a superior performance unless you do something different from the majority.”
1 Fundamental value is the genuine intrinsic worth of a company, as determined by factors such as the estimated value of the future cash flows it will generate, or the value of the assets on its balance sheet.
2 Source: Data Stream 31/05/2006 to 31/01/2024
GLASS HALF FULL?
There have been many reasons over recent years for investors to be ‘out of love’ with the UK; Brexit, political uncertainty, pandemic, Ukraine, Trussonomics and the perception of worse inflation & economic performance for the UK to name a handful. But, has the depressed sentiment been overdone? In this podcast the team discuss that with many of these factors firmly in the rear-view mirror, and with interest rates potentially close
to their peak and UK economic growth recently being revised upwards, could the glass actually be half-full, rather than the pessimistic alternative?
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not
get back the full amount invested. Past performance does
not predict future returns. For further information contact the issuer at the address indicated below. This is a marketing communication issued by Allianz Global Investors UK Limited,
an investment company, incorporated in the United Kingdom, with its registered office at 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk. Allianz Global Investors UK Limited company number 11516839 is authorised and regulated by the Financial Conduct Authority. Details about the extent of our regulation are available from us on request and on the Financial Conduct Authority’s website (www.fca.org.uk). The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors UK Limited. The Merchants Trust PLC is incorporated in England and Wales. (Company registration no. 28276). Registered Office: 199 Bishopsgate, London, EC2M 3TY.