Latest / Merryn Talks Money / The UK Is Still Losing Cheap Stocks to Private Equity Bargain Hunters

Transcript

The UK Is Still Losing Cheap Stocks to Private Equity Bargain Hunters · Merryn Talks Money

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
• 0:17
  Speaker 2: Welcome to the Marrin Jokes money Market Wrap. But we
• 0:20
  Speaker 2: talk about the biggest moss of the market this weekend.
• 0:22
  Speaker 2: What is driving them? I'm Mary's them. We're better to
• 0:24
  Speaker 2: at large for Bloomberg UK Wealth.
• 0:26
  Speaker 3: And I'm joined Stairpak, senior Reportland Bloomberg and author of
• 0:29
  Speaker 3: the money Distilled News Later.
• 0:32
  Speaker 2: Right, John, there is a lot going on, but do
• 0:34
  Speaker 2: you know what we're not going to do?
• 0:35
  Speaker 3: What are we not going to do?
• 0:37
  Speaker 2: We're not going to talk about the government. We're not
• 0:39
  Speaker 2: going to talk about the leadership crisis. We're not going
• 0:42
  Speaker 2: to talk about kis drama and who might or might
• 0:44
  Speaker 2: not replace him, because that way madness lies, madness and
• 0:47
  Speaker 2: misery and podcastmergency podcast yesterday we did and that was
• 0:53
  Speaker 2: great fun. We might do more emergency podcasts as Yeah,
• 0:55
  Speaker 2: I rather enjoyed that. It was quite at anyway, this
• 0:58
  Speaker 2: is not an emergency podcast, so that means that we
• 1:00
  Speaker 2: do not have to discuss the aneriquacies of UK politics.
• 1:04
  Speaker 2: So why don't we just talk about the innerioquises or
• 1:06
  Speaker 2: the stock marketing and stuff. There's a lot going on
• 1:08
  Speaker 2: in the UK market as well, right, John and not
• 1:10
  Speaker 2: the bone market. Yeah.
• 1:11
  Speaker 3: Market actually, I mean what's really interesting. We've been banging
• 1:15
  Speaker 3: on or discussing for a long time about her UK
• 1:18
  Speaker 3: market undervalued, underappreciated, lots of decent stops run around private
• 1:23
  Speaker 3: equity buyers kind of like chewing bits of the market
• 1:26
  Speaker 3: off left, right and center, and we kind of, you know,
• 1:29
  Speaker 3: have let that lapse for a little while because there's
• 1:31
  Speaker 3: been so much drama and politics and all the rest
• 1:33
  Speaker 3: of it. But it's still happening. So we've had today
• 1:36
  Speaker 3: is what we called and Inspire Healthcare just got a
• 1:39
  Speaker 3: big bed from TOSCA found this year prices up something
• 1:43
  Speaker 3: like I think was it two twenty, which is absolutely
• 1:46
  Speaker 3: seventy p in the day, So so massive jump there.
• 1:49
  Speaker 3: Clearly an undervalued stock in the first place.
• 1:52
  Speaker 2: Well they're well that's not necessarily given that they're undervalued.
• 1:55
  Speaker 2: When private equity buys them, there's just a well yeah,
• 1:57
  Speaker 2: given them privately thinks they're undervalue.
• 1:59
  Speaker 3: Yeah, think that it's quite a big premium. Put it
• 2:01
  Speaker 3: that away. But we've also got a colleague, Chris Hughes
• 2:05
  Speaker 3: the other day wrote a piece earlier this week entitled
• 2:08
  Speaker 3: private Equities Liquidation of London goes on, and this was
• 2:11
  Speaker 3: about Intertech Group, which is looking to accept a proposal
• 2:15
  Speaker 3: from EQT which that private equity a lot. They said
• 2:20
  Speaker 3: that on Wednesday, and basically Chris says, one day there
• 2:22
  Speaker 3: won't be any decent London listed companies left for private
• 2:24
  Speaker 3: equity funds to buy, and it's kind of hard to
• 2:28
  Speaker 3: disagree with them. And there's also been quite a lot
• 2:30
  Speaker 3: of action in the investment trust space. Recently picked in
• 2:33
  Speaker 3: Property has going to have been bought by I can't remember
• 2:37
  Speaker 3: the top of my head, but two other property investment trusts.
• 2:40
  Speaker 3: So there's just a lot of stuff going on. And
• 2:43
  Speaker 3: I think that our basic thesis that the UK market
• 2:46
  Speaker 3: has an awful lot of potential, an awful lot of
• 2:48
  Speaker 3: undervalued stuff there that's not being appreciated, still stands well.
• 2:52
  Speaker 2: If we've said at once, we've said it a million times.
• 2:54
  Speaker 2: If you ran by this cheap souff, somebody else will
• 2:57
  Speaker 2: and then be available to you. Any more won't be
• 3:00
  Speaker 2: available on the market for everyone in the UK to
• 3:03
  Speaker 2: invest in, and the whole wealth problem loomed larger and larger.
• 3:07
  Speaker 3: And it's bad news for capital formation, it's bad news
• 3:10
  Speaker 3: for you auto democracy and all the other things that
• 3:12
  Speaker 3: we talk about, which are I guess can small print things.
• 3:16
  Speaker 3: They kind of nobody really talks about them, but they're
• 3:18
  Speaker 3: actually quite important because people feel left out.
• 3:22
  Speaker 2: And again, I mean again I do not want to
• 3:24
  Speaker 2: vary into politics, not doing that. But if you are
• 3:27
  Speaker 2: a foreign investor thinking to yourself, will I invest in
• 3:29
  Speaker 2: the UK? You look with and you go, oh lord,
• 3:31
  Speaker 2: you look at those energy produces, look at those politicians,
• 3:33
  Speaker 2: look at the chaos, and you don't touch yet. But
• 3:35
  Speaker 2: it won't take well, the go say it won't take much.
• 3:38
  Speaker 2: That's not really true anymore. With it. It will take
• 3:39
  Speaker 2: quite a lot for the UK to start sending a
• 3:41
  Speaker 2: different kind of signal to the international investing community.
• 3:44
  Speaker 3: Yeah, but it would be easy to do. It just
• 3:47
  Speaker 3: takes a different approach. Simple, not easy, John, Oh yeah, simple,
• 3:51
  Speaker 3: not easiest probably.
• 3:55
  Speaker 2: Anyway, we should know briefly about the US market, which
• 3:58
  Speaker 2: is I mean this, it's just unstoppable, right, It goes
• 4:02
  Speaker 2: and it goes and it goes. And we talked last
• 4:04
  Speaker 2: week in this podcast about about signals that things are
• 4:07
  Speaker 2: getting near the top, and you talked about IPOs and
• 4:10
  Speaker 2: how it was definitely the case that in two thousand
• 4:13
  Speaker 2: you saw this big wave of IPOs coming in before
• 4:16
  Speaker 2: the market finally broke, and we said we would look
• 4:19
  Speaker 2: and see if it was also the case of that
• 4:21
  Speaker 2: had happened in other crises. And you'll never guess what.
• 4:24
  Speaker 2: You'll never guess what in terms like that, there is
• 4:27
  Speaker 2: a big rise in the overall value of EPA of
• 4:31
  Speaker 2: IPOs in the twelve month eighteen months or so before
• 4:34
  Speaker 2: each market crash. But I suppose what you would say
• 4:37
  Speaker 2: here is we haven't actually had these IPOs yet. So
• 4:40
  Speaker 2: these big ideas that you were talking about last week
• 4:42
  Speaker 2: and you've been talking about in your newsletter, they still
• 4:44
  Speaker 2: only mooted, so they haven't been able to upset the
• 4:46
  Speaker 2: supply demand balance in the market yet. So maybe if
• 4:50
  Speaker 2: you look at it like that, there's still a way
• 4:52
  Speaker 2: to run for the US market where it could be.
• 4:54
  Speaker 3: I mean, I think what was interesting this week again
• 4:56
  Speaker 3: just focusing on the kind of short term Obviously, we
• 5:00
  Speaker 3: get a lot of emails from people and read a
• 5:02
  Speaker 3: lot of research reports, and one thing that I noticed
• 5:05
  Speaker 3: was that this week, and I just got a reminder
• 5:07
  Speaker 3: because I used to talk about interest rates an awful
• 5:09
  Speaker 3: lot and the importance of the US Central Bank, specifically
• 5:13
  Speaker 3: the Federal Reserve, and I don't really kind of like
• 5:15
  Speaker 3: talks about that for a while. But this week we
• 5:17
  Speaker 3: got kind of quite bad inflation figures.
• 5:19
  Speaker 2: Out of the Yes, unexpectedly high.
• 5:21
  Speaker 3: Yeah, unexpectedly. I mean again you always say, like, well,
• 5:23
  Speaker 3: who we might expect? Yeah, exactly, it was higher than
• 5:27
  Speaker 3: the market was prepared for. And so the problem there
• 5:29
  Speaker 3: is that that means that again, similar to the UK,
• 5:32
  Speaker 3: the Fed's gone from being expected cut rates at the
• 5:34
  Speaker 3: start of the year and now people are thinking, actually,
• 5:36
  Speaker 3: it might have to raise them. And of course one
• 5:38
  Speaker 3: thing that you know markets don't like is higher interest rates.
• 5:42
  Speaker 3: Higher interest rates also imply a stronger dollar, all else
• 5:45
  Speaker 3: being equal, And a stronger dollar, again all else being equals,
• 5:49
  Speaker 3: usually bad for acid prices because everyone needs dollars, so
• 5:53
  Speaker 3: if they get more expensive, there's less money to spend
• 5:55
  Speaker 3: and everything else. A couple of people follow us saying,
• 5:58
  Speaker 3: I said, this might be the thing. It doesn't necessarily
• 6:01
  Speaker 3: mark a top, but it might be the thing that
• 6:03
  Speaker 3: kind of stops the momentum element the current run in
• 6:07
  Speaker 3: its tracks. And to be fair, it does seem to
• 6:09
  Speaker 3: have had a bit of a dent on the S
• 6:11
  Speaker 3: and P and the NASDAC particularly true.
• 6:13
  Speaker 2: But I mean that's after an absolutely extraordinary run. Right
• 6:17
  Speaker 2: numbers here in front of me. You know, MAG seven
• 6:19
  Speaker 2: is an now up by over twenty seven percent in
• 6:21
  Speaker 2: just six week. Yes, and the concentration r pretty semiconductor
• 6:25
  Speaker 2: indecks up nearly seventy percent of that centier period. Really something.
• 6:29
  Speaker 3: That's another thing that we didn't talk about because the
• 6:32
  Speaker 3: semi conductors, yeah, they're up a lot. But this week, again,
• 6:36
  Speaker 3: there was an interesting thing. I thought we were. One of
• 6:40
  Speaker 3: the policymakers in South Korea made noises about how there
• 6:44
  Speaker 3: should be tax or AI that we yeah, you'll find
• 6:49
  Speaker 3: something akin to not universal basic can come, but you know,
• 6:53
  Speaker 3: shielding people from the fallout of the joblessness. And the
• 6:56
  Speaker 3: market felt something like five percent just on yeah, the
• 7:01
  Speaker 3: South Korean index. And I mean the guy then clarified
• 7:03
  Speaker 3: he didn't mean we'll not go put a wind fall
• 7:05
  Speaker 3: tax on the I He just meant they're going to
• 7:08
  Speaker 3: make so much money that we'll raise more tax. But
• 7:11
  Speaker 3: I think it just gives you an insight into another
• 7:14
  Speaker 3: risk out there. Yeah, well, the fragility, but also the
• 7:17
  Speaker 3: fact that actually, you know, a politician might come along
• 7:20
  Speaker 3: and say, actually, yes, This is a problem because you know,
• 7:24
  Speaker 3: you're going to put loads of people out of jobs,
• 7:25
  Speaker 3: and even though it's not happening yet, there's nothing to
• 7:28
  Speaker 3: stop them from acting preemptively. And so I think, I mean,
• 7:31
  Speaker 3: obviously tech has always had that slightly un kind of
• 7:35
  Speaker 3: comfortable relationship with politics, but you can see that there
• 7:38
  Speaker 3: might be something that happens in the future. You know,
• 7:40
  Speaker 3: if data is the new oil, then data is also
• 7:43
  Speaker 3: where the new wind fall taxes are going to fall,
• 7:46
  Speaker 3: so that here in the UK, Yeah, there's with people
• 7:49
  Speaker 3: thinking about at least I.
• 7:51
  Speaker 1: Guess I'm thing that's bothering me is the breath that
• 8:04
  Speaker 1: they just aren't.
• 8:05
  Speaker 2: There are a certain number of stocks making new highs
• 8:07
  Speaker 2: over and over and over again, but there are many
• 8:09
  Speaker 2: more that aren't doing that. And on Wednesday, you know,
• 8:12
  Speaker 2: I think sixty sixty five percent of S and P
• 8:15
  Speaker 2: five hundred sightly declined. You know, so you got another
• 8:18
  Speaker 2: You have these new hires, but under the water, it's
• 8:21
  Speaker 2: really being led by a narrower and narrower and narrower
• 8:24
  Speaker 2: group of stocks. And that should be really worrying for
• 8:27
  Speaker 2: anyone who holds an index.
• 8:29
  Speaker 3: For example, I think so, and I think that's that's
• 8:32
  Speaker 3: I guess we have to get back to practicalities here
• 8:34
  Speaker 3: of well, because you know, obviously we talked about as
• 8:37
  Speaker 3: a lot, and all of these markets have gone up
• 8:39
  Speaker 3: a lot, so it's not as if there has been
• 8:41
  Speaker 3: a crash, and we have discussed it for a long time.
• 8:45
  Speaker 3: But I think that's the point, is what you see,
• 8:47
  Speaker 3: it's been a wheel, so you don't panic when it harmens,
• 8:49
  Speaker 3: because it will harmen at some point, not Philly.
• 8:52
  Speaker 2: The fiscal crisis, it will happen at some point. There's
• 8:55
  Speaker 2: con't quite anly well, but I feel a little closer
• 8:57
  Speaker 2: them to invest.
• 9:01
  Speaker 3: So I think you're pointing about sticking with kind of
• 9:04
  Speaker 3: equal weighted tracker indexes. If that's the kind of thing
• 9:08
  Speaker 3: that you invest in. I mean, it doesn't. They don't
• 9:10
  Speaker 3: do as well as they heavily concentrated ones. But that's
• 9:12
  Speaker 3: kind of like saying you're not doing as well in
• 9:14
  Speaker 3: the tracker as if you just bought in the video.
• 9:17
  Speaker 3: Well okay, yeah, you could put on percent of your
• 9:18
  Speaker 3: money in the video and be much better off, but
• 9:21
  Speaker 3: you wouldn't risk you wanted it exactly exactly, And I
• 9:24
  Speaker 3: think that's all you can really do, and most people
• 9:27
  Speaker 3: are just feeding money into the market every month anyway,
• 9:32
  Speaker 3: so you are kind of pound cost dollar cost averaging
• 9:37
  Speaker 3: purely unless you're you've just had a win for you're
• 9:40
  Speaker 3: a very wealthy person. So for most people trying to
• 9:44
  Speaker 3: stay calm, revisit your portfolio maybe once every six months
• 9:48
  Speaker 3: to make sure that you aren't too exposed to something
• 9:50
  Speaker 3: you don't want to be too exposed to, and then
• 9:53
  Speaker 3: just kind of get on with it. Other than that, well,
• 9:56
  Speaker 3: the most sensible man, it's very boring.
• 10:00
  Speaker 2: Listen, listen, I want to encounter the boringness of what
• 10:04
  Speaker 2: John has just said by saying that. And this is
• 10:06
  Speaker 2: this is for our British listeners that there's been a
• 10:09
  Speaker 2: change to the premium bonds prize fund rate right and
• 10:14
  Speaker 2: this is exciting. So NS and I in National Savings
• 10:16
  Speaker 2: and Investment allow you to buy in the UK premium bonds.
• 10:19
  Speaker 2: You get you know, each cost pound to get your
• 10:21
  Speaker 2: pound back whenever you like. But also your bonds are
• 10:23
  Speaker 2: drawn and you can win prizes and the overall yield
• 10:26
  Speaker 2: on these bonds is generally not particularly high, but it's
• 10:29
  Speaker 2: very exciting when you win minimum prizes twenty five pounds
• 10:32
  Speaker 2: maximum is still a million.
• 10:33
  Speaker 3: Isn't it a billion million a million and.
• 10:36
  Speaker 2: The odds of winning have been twenty three thousand to one.
• 10:39
  Speaker 2: That's fine, next one lottery, right, that's going down to
• 10:42
  Speaker 2: twenty two thousand to one. The prize pot is going
• 10:47
  Speaker 2: up quite a lot. There are now going to be
• 10:50
  Speaker 2: twelve additional one hundred thousand pound prizes, twenty four more
• 10:53
  Speaker 2: fifty thousand pound prizes, and an extra forty nine twenty
• 10:57
  Speaker 2: five thousand pounds prizes, and fewer of the little ones
• 11:00
  Speaker 2: and twenty five pound prizes. So you know, if you
• 11:03
  Speaker 2: think to yourself quite want to be sure of getting
• 11:07
  Speaker 2: away capital back, perhaps I'll just do something that is
• 11:10
  Speaker 2: a bit more fun. I'm proprimium bond. I've got a
• 11:13
  Speaker 2: lot of Bremian bond. I was most financially efficient thing
• 11:15
  Speaker 2: in the world. But it was getting very excited. Wall
• 11:18
  Speaker 2: oh yes, absolutely no text to me on these because
• 11:20
  Speaker 2: you're gambling, I guess yeah yeah.
• 11:23
  Speaker 3: And also is it not just because basically they'll just goelps,
• 11:26
  Speaker 3: but with a slightly different VARNI showing them. But I
• 11:30
  Speaker 3: guess that's been more.
• 11:31
  Speaker 2: Yield anyway, I'm ropriseed. So the total number of prizes
• 11:33
  Speaker 2: is increasing significantly and the proportion of twenty five pound prizes,
• 11:36
  Speaker 2: which is one that I was one when I don't
• 11:38
  Speaker 2: have ever one more than twenty five pounds, has fallen
• 11:40
  Speaker 2: from forty seven percent ful prizes to thirty seven percent.
• 11:43
  Speaker 2: So my chance of winning more than twenty five quid
• 11:45
  Speaker 2: has just risen significantly from when I do win more
• 11:48
  Speaker 2: than twenty five quid. I am coming back to tell you,
• 11:51
  Speaker 2: I don't know if you can fiddle those numbers, but
• 11:53
  Speaker 2: premium bond people, if you can fiddle the numbers, fill
• 11:55
  Speaker 2: the numbers. See.
• 11:56
  Speaker 3: I actually think this is something we should do if
• 11:58
  Speaker 3: we ever get to talking about natural history again on
• 12:01
  Speaker 3: the podcast.
• 12:01
  Speaker 2: Then hoping we're going to be allowed to do that.
• 12:03
  Speaker 3: Really so yes, I know would be good. But I
• 12:05
  Speaker 3: am surprised that more countries and I wonder if we
• 12:09
  Speaker 3: will see more of this as more countries getting the
• 12:11
  Speaker 3: difficulties with spending for these lottery style debt issuance, because
• 12:18
  Speaker 3: the whole point is basically you get an excitement premium,
• 12:21
  Speaker 3: so your course, the capital as a country goes down
• 12:24
  Speaker 3: because people went to gamble so you can raise the money.
• 12:27
  Speaker 3: I mean, it strikes me as a much more sensible
• 12:29
  Speaker 3: way to raise money.
• 12:32
  Speaker 2: With in terms of shelter democracy the other day, right,
• 12:34
  Speaker 2: that'd be really greater for perk as the perk a
• 12:37
  Speaker 2: couple of shares were pulled out of a hat digitally
• 12:40
  Speaker 2: pulled out of a hat every year and you've got
• 12:42
  Speaker 2: a knife, hamper or champagne or free car insurance like that.
• 12:49
  Speaker 2: You know, the lottery concept is a great one and
• 12:51
  Speaker 2: hugely under used by governments. I would say, we love,
• 12:54
  Speaker 2: we love to gamble, help us do it.
• 12:56
  Speaker 3: I do think that the other thing, when you were
• 12:58
  Speaker 3: seeing a bit and getting rid of the smaller prices there,
• 13:00
  Speaker 3: that's a good idea too, because the idea of the
• 13:02
  Speaker 3: you know me when yeah, I might win a million,
• 13:05
  Speaker 3: but I may win twenty five quid if it's you
• 13:08
  Speaker 3: may win a million or one hundred grinds and people
• 13:11
  Speaker 3: don't then do the OIDs if.
• 13:15
  Speaker 2: Telephone you if someone telephoned me and told me I'd
• 13:17
  Speaker 2: won a million, quit on premium bonds, I think I
• 13:18
  Speaker 2: just assumed was scam death. We comfine. Well, that's another problem.
• 13:23
  Speaker 2: Don't want to about that anyway, not to worry about.
• 13:26
  Speaker 2: But if you have premium bonds, you might win fifty quid.
• 13:29
  Speaker 2: Good luck with that. Thanks for listening to this week's
• 13:34
  Speaker 2: Marrion Dogs Money Debrief. If you like our show, rate review,
• 13:37
  Speaker 2: and subscribe wherever you listen to podcasts. Also, if you showed,
• 13:39
  Speaker 2: follow me and John on x or Twitter at marinas
• 13:42
  Speaker 2: w and John Underscore step Back. This episode was produced
• 13:45
  Speaker 2: by some Asadi, production support and sound designed by Moses
• 13:48
  Speaker 2: and Questions and comments on this show and all those
• 13:50
  Speaker 2: shows are always welcome. I show email is Merry Money
• 13:53
  Speaker 2: at Bloomberg dot net