London On The Back Foot

The prospect for U.K. stockbrokers has never been grimmer. The London Stock Market is dying; even the exchange believes its day may be numbered if the investment environment isn’t changed.

Back around the dotcom, the U.K. government frogmarched the pension industry out of shares and into bonds and this has drained liquidity. Then you have the pesky 0.5% transaction tax and then you have the “fog in the channel, continent cut off” Brexit, where 500 million people lost easy access to a country of 60 million people and 60 million people lost easy access to a country and its markets of 500 million people.

The U.K. is once again Angleterre, translated…. A corner of the earth, not the center as its egocentric maps continue to suggest.

Consequently the U.K.’s listed companies are cheap as chips and prostate before any corporate predator. However, the big beasts have not yet gone on a feeding frenzy.

I do go on about this but at some point the dam will break for U.K. takeovers. The situation is so dire in the city of London that even the U.K. government has spotted that the square mile is about to slip off the bank and into the Thames to be washed out to sea or more likely into the riverside of docklands like 18^th century effluvia. Sorry for metaphorical overload but I couldn’t help myself.

The people you meet there couldn’t be more depressed. What is more when Labour get in…..

So this must be the bottom!

Well, that would be nice because value contrarian investing and income investing are taking a beating.

I use the small-cap index to see a de-noised chart of the U.K. market and here it is:

It’s not a clear chart currently but the reason it’s useful is because in the past it shows clear long-term trends. It remains speculative to suggest we are at a bottom but at least it’s clear we aren’t in a clear cut bear. You might even suggest this:

I’d prefer to say here are five takeover possibilities:

• BT (LSE:BT.). Altice will surely bid.
• De La Rue (LSE:DLAR). Crystal Amber wants out and other security printers want in. Many new board members will be itching to do the deal.
• Vodafone (LSE:VOD). Already effectively a takeover with Vod’s 50/50 merge with 3. Skates will be worn and repricing will kick off.
• ITV (LSE:ITV). A snack for U.S. media or anyone looking for programming past and future. Only regulatory nostalgia would get in the way.
• GSK
  GSK
  ? Hell yes, if is it Haleon (LSE:HLN) Yes! Now all the highly valued stuff is away, all the patent medicines for coughs and wheezes can be sold to more highly valued purveyors of cough and wheezes companies in the U.S.

Really you can just go look up companies with P/E below 5, fat dividends and no horrible outstanding issues and there you have an asset strip candidate.

If it’s the bottom, this is the time to start easing in, because there is an embarrassment of choice in value in the U.K. for now.

If it looks like a bottom, acts like a bottom and sounds like a bottom, it’s probably a bottom.