Richard Buxton is chalking up the Conservatives landslide in Thursday’s general election as a victory for UK value managers like himself who have endured consecutive months of outflows and investors shunning domestic stocks.
Buxton (pictured) has long championed unloved areas of the UK domestic market like the high street banks, utilities and industrials which have seen their share prices rattled since the Brexit vote.
But his value plays have been punishing in the short-term. His £1.7bn Merian UK Alpha fund has failed to beat the IA UK All Companies average over five years, delivering 36% against the sector’s 40.9%. Over one and three years the fund has just managed to best the average performance, returning 15.9% and 23.0% against peers’ 13.8% and 20.4% respectively.
Ruminating on the general election outcome on Friday morning, Buxton said that the result was a “positive development” for investors in the UK stockmarket and could help the asset class return to favour.
“The disappearance of the perceived risk of a Corbyn-led government will be seen as an overwhelming positive by international investors, for whom the UK market may now regain its previous appeal,” Buxton said ruminating on the general election outcome Friday morning.
“As an investor in a sector that has endured many consecutive months of net outflows, today’s result feels like a distinctly positive development.”
Buxton’s bet on British banks pays off
HSBC and Lloyds feature which feature in the top 10 largest holdings in his Merian UK Alpha fund saw their share prices jump on Friday morning. Of the two high street banks Lloyds saw the strongest rebound with its shares climbing to an eight-month high of 65p a share.
But the best performing FTSE 100 banks were RBS and Barclays which shot up 10.4% and 7.8% to 256p and 185p respectively.
Ultimately the beleaguered UK housebuilders were the true victors on Friday morning. The quartet of Britain’s largest housing companies all saw double digit gains on the day with shares in Taylor Wimpey recovering to levels not seen since May 2018.
Top 10 FTSE 100 risers
| Company | Share price gain | Current price |
| Taylor Wimpey | 15.2% | 201p |
| Berkeley Group Holdings | 13.0% | £50.96 |
| Barratt Developments | 12.7% | 756p |
| Persimmon | 11.1% | £27.93 |
| International Consolidated Airlines Group | 10.4% | 614p |
| RBS | 10.4% | 256p |
| SSE | 8.9% | £14.27 |
| United Utilities Group | 8.3% | 919p |
| Centrica | 8.1% | 87p |
| Land Securities Group | 7.8% | £10.05 |
Source: Hargreaves Lansdown
Elsewhere energy and utilities companies like SSE and United Utilities also showed signs of recovery as markets digested news of the Conservatives landslide. These stocks had previously flagged following Labour leader Jeremy Corbyn’s plans to nationalise Britain’s energy networks.
Sterling could hit $1.40 soon
Buxton said the “sheer scale” of Johnson’s majority means the prime minister will have more wiggle room to orchestrate the UK’s departure from the European Union during 2020 thereby greatly reducing the threat of a “cliff edge” Brexit scenario.
Off the back of this he expects to see business and consumer confidence “strengthen significantly”. The next Budget, due to be announced in February, should also be looser in terms of fiscal spending, providing further economic stimulus, he thinks.
Despite sterling’s initial reaction to the general election results being “more muted than might have been expected” Buxton said there’s room for the pound to strengthen further. “At the time of writing, the pound was trading at around 1.35 versus the US dollar; from here, it wouldn’t seem too outlandish to suggest that 1.40 could soon be within reach.”
While Buxton said a stronger pound would weigh on some of the big dollar earners like the oil companies, “instinct tells me that the effect of sterling strength will be outweighed by the sheer relief that a prolonged period of political stasis is, at last, over”.
