Page 34 - DIY Investor Magazine | Issue 32

‘WE’VE BEEN ABLE TO IDENTIFY THOSE LOWLY-PRICED COMPANIES THAT REALLY ARE GENUINELY GOOD BUSINESSES THAT WERE UNDER-PRICED’
So as a value investor, I find it a really exciting time to be looking at a market, there are plenty of opportunities to buy genuinely good companies that are wrongly priced, mispriced, because people have too high expectations about growth, or just simply because they are out of favour.
JC: Finally, Simon, just looking ahead, now – crystal ball time, here – is there anything that you think could surprise markets in 2022? What’s your outlook for the year ahead?
SG: It’s a great question, but of course almost impossible
to answer, and also a critical one. I think the course of the pandemic will remain really important to markets. I think we mustn’t forget about geopolitical risks, which maybe have been bubbling beneath the surface between Russia and China and America.
We’ve got inflationary pressures building up, interest rate policies; there’s lots of things that we need to keep an eye on and are potential risks for markets and for investors.
Having said that, there always are a lot of risks out there.
We don’t spend most of our time thinking about these types
of issues - we clearly are aware of them and they do come
into our consideration, but where we spend most of our time
is looking at individual businesses, individual companies, and trying to identify strong businesses that in the medium to long term can make good profits; can generate sensible, reasonable cash flows, resilient cash flows; and can pay attractive dividend yields to investors.
‘WE CAN FIND PLENTY OF OPPORTUNITIES TO BUY REALLY STRONG BUSINESSES AT FUNDAMENTALLY ATTRACTIVE VALUATIONS’
If we can find good businesses that are well positioned in most scenarios, to deliver strong returns in the long term and deliver cash flow and dividends to shareholders – and most importantly, if we can buy them at sensible prices – then I think that’s great.
And at the moment when we look at markets, when we look at the UK equity market, we can find plenty of opportunities to buy really strong businesses at fundamentally attractive valuations where we believe we’re going to earn good returns for shareholders and a good income stream.
And that’s what we’re trying to do – we’re not trying to be too clever.
And so I think a way to end this conversation really is to say, look, we’re pretty optimistic, when we look at the portfolio, about the type of companies we’re able to buy and the prices we’re able to buy them.
And that should cope with most scenarios, but clearly, you know, when is it possible to know at the beginning of the year what’s going to happen?
JC: Well, Simon, I wish you best for the rest of this year, and as ever, it’s a pleasure speaking to you. Unfortunately, we’re out of time now, but thank you very much indeed.
Find out more about The Merchants Trust here > by going to merchantstrust.co.uk.
DIY Investor Magazine · Feb 2022 34