But, he is quick to point out, this has little to do with his macro outlook on the country and much to do with the type of stocks he likes currently – which include the likes of British American Tobacco and HSBC.
In fact, he is more bullish on continental Europe than on the UK, at the moment. The main reason for this is that the region could be undergoing a ‘New Deal’ type of moment.
“For five years you had the US and then the UK printing money, then Japan started and for a long time the EU was out of step. The macro policy looks a lot less out of step now. And, while it is clear that Europe will remain volatile, there is also scope for the region’s profit cycle to come through after what has been a period of very little in terms of earnings recovery,” Davis said.
Davis also expects dividends to continue to grow in the region, as balance sheets are very strong at the moment.
“Europeans have historically focused on bonds for income, but the region is beginning to take dividends much more seriously,” he added.
That said, he cautions against chasing yield.
“Spot the highest dividend, is the wrong game to be playing,” he told Portfolio Adviser, “I am looking for stocks with reasonable, growing dividends that can withstand all parts of the cycle.”
Davis believes that there are always going to be good companies to be found at attractive valuations because markets are always too short-term in their time horizons.
“Because everyone is scared of underperforming over three months, there are inefficiencies to exploit. People always underestimate the duration of growth.”
