Recovery stocks can be among the most profitable investments. One reason for this is that the market usually expects disappointing financial performance from them, which generally means low valuations. If the companies in question are able to beat market forecasts and deliver a sustained turnaround, it can lead to above-average valuations. The end result is often a high profit for investors.
One recovery theme for the long term could be UK-focused companies. The UK economy faces perhaps its biggest challenges since the financial crisis due to Brexit, and stocks which rely on it for the bulk of their revenue could see their financial performance suffer.
Within this theme, retailers may offer the most significant recovery potential. CPI inflation has hit 2.9%, which is 1.1% above wage growth. Historically, an inflation rate which is significantly ahead of wage growth causes consumer spending to come under pressure. Individuals will either hold back on spending on a wide range of discretionary items, or trade down to cheaper options on consumer staples.
by Evil Knievil| Evil Diaries| 1 mins. to read It's a wungermaul life: I did not realise this until listening to the tennis yesterday. A wungermaul arises where each player has won one game. My pick, Venus Williams, is still there.
by Ruzbeh Bacha| Trading| 7 mins. to read When I was raising funds for my FinTech start-up CityFALCON, I mentioned that our most active user on the platform is a woman who trades from home while her family is out. I would never have imagined of the reaction that I got then: "this clearly can't be one of your target audiences"
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