Valuation as our compass
While the energy transition and similar themes present compelling opportunities, valuation remains our guiding compass. The UK has been the world's cheapest market for the past four to five years and has only become more attractive. However, UK companies continue to trade at much lower valuations than their American counterparts which are worth 22 times earnings. We don’t believe UK companies are worth 4/5 times earnings, so have been investing in businesses that we believe are promising long-term franchises. We are also seeing positive earnings surprises from British companies, which could indicate a potential recovery.
Usually, there is catalysts for markets to trade higher. What we have been seeing is that eventually, if governments get enough pressure, they start to take measures to make their markets more attractive. Japan is a great example. Through the Tokyo Stock Exchange, it implemented regulation to ‘name and shame’ companies that were trading at low valuations and not meeting guidelines on financial reporting and governance. Korea is now following a similar approach—could the UK be next? Maybe it’s already happening as investors scour the world for great opportunities as the economy stabilises.
At Orbis, our investment strategy is all about finding undervalued opportunities in a complex and changing market. By sticking to our contrarian approach, conducting thorough research, and staying flexible in our asset allocation, we aim to deliver consistent returns while managing risk effectively. Our approach ensures that we’re not just riding the waves of market trends but strategically diving into the depths to uncover true value.
Disclaimer
The contents of this communication have been approved for issue in the United Kingdom by Orbis Investments (U.K.) Limited which is authorised and regulated by the Financial Conduct Authority. Orbis Investments (U.K.) Limited and Orbis Investment Management Limited are members of the Orbis group of companies (“Orbis”).
This communication does not constitute an offer, solicitation or recommendation to buy, sell or hold any interests, shares or other securities in the companies mentioned in it. Orbis has not considered the suitability of this investment against your individual needs and risk tolerance. You must not rely upon this communication or any part of it as investment advice and Orbis does not assume and will not accept responsibility or liability (whether arising in contract, tort, negligence or otherwise) for any error, omission, loss or damage (whether direct, indirect, consequential or otherwise) in connection with the information in this communication and disclaims any such liability to the maximum extent permitted by law. This communication represents Orbis' view at the date stated and may provide reasoning or rationale on why we bought or sold a particular security for a fund. We may take a different/the opposite view/position from that stated. This is because our view may change as facts or circumstances change. This communication has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Entities and employees of Orbis are not subject to restrictions on dealing in relevant securities ahead of the dissemination of this review.
