Page 26 - DIY Investor Magazine | Issue 30

THE MERCHANT’S TRUST PLC THE UK FIVE YEARS ON...
This is an extract from the latest episode of the ‘A Value View’ podcast from The Merchants Trust.
In each edition Simon Gergel, fund manager at The Merchants Trust, offers his thoughts on developments affecting the UK market and what it means for investors.
THE UK, FIVE YEARS ON
Five years ago, the UK made a momentous decision; in the national referendum to decide whether the UK should remain a member of the European Union, Britons voted to leave.
‘ALTHOUGH IT’S BEEN A CHALLENGING PERIOD, WE’RE VERY PLEASED WITH HOW WE NAVIGATED IT’
Almost 50 years of UK membership of the largest trading bloc in the world came to an end. Since then, the UK has seen multiple changes in government, navigated acrimonious exit negotiations and signed, finally, a new EU/UK trade and cooperation treaty. So, what has all this meant for the UK market?
It has certainly been an extraordinary five years, and not just Brexit discussions and uncertainty. We’ve had the pandemic to deal with, plus the prospect of a quite far left-wing government in the middle as well, so it’s been a period of extreme volatility in financial markets and in the economy.
Although it’s been challenging, it’s been a very profitable period for investing. When I was learning to drive, I was taught when you’re on the motorway you need to look not at the cars around you, but at the cars a long way in the distance to work out what’s coming.
That’s been the guiding rule for us for the last four or five years: to look at what businesses are going to be like in three- or four- years’ time; to try and look through Brexit uncertainty, through political uncertainty, and most recently through the pandemic uncertainty, and take advantage if share prices move a long way out of line.
There were periods of severe dislocation in markets, different sectors and different stocks and we managed to take advantage of that overall and come out with a good result
in terms of the performance of The Merchants Trust and the portfolio within that.
Although it’s been a challenging period, we’re very pleased with how we navigated it.
LAND OF OPPORTUNITY
It has been an uncertain, challenging time economically and politically for the UK, but when it comes to the markets, there are opportunities we’ve been able to take advantage of.
The most obvious was during the pandemic last year where the market fell very sharply. Within that there was enormous dislocation and dispersion between companies that were seen as more resilient, and companies more exposed to a slowing economy and some of the issues around travel and isolation we’ve had to deal with.
There were some fantastic opportunities for a value investor to pick up really strong companies at unusually depressed prices last year.
There were periods when we were concerned about
the prospect of quite a hard left government, and also opportunities during the Brexit negotiations when investors got concerned about the outlook for the UK generally, and the whole UK market got quite depressed.
It’s been a really interesting period; the UK market’s still pretty cheap and although you are starting to see investors coming back to the UK, there are still big opportunities.
DIY Investor Magazine | Sept 2021 26