Stuart Kirk Sours on UK Shares at 13 Times Earnings as Profit Growth Stalls
Updated
Updated · Financial Times · Jul 17
Stuart Kirk Sours on UK Shares at 13 Times Earnings as Profit Growth Stalls
1 articles · Updated · Financial Times · Jul 17
Summary
UK shares are now Kirk’s least compelling holding: his 30% portfolio weighting trades at about 13 times forward earnings versus a 12-times long-run average, with little earnings growth to justify it.
That contrasts with markets he finds more attractive because profits have risen alongside valuations. In Asia, earnings are up about a tenth since March, keeping PE ratios below the region’s five-year average.
Latin America also still looks cheap, with an aggregate PE ratio in single digits, while Kirk has cut Japan exposure to 10% from 40% last year after Topix moved back above its 15-year average.
The US also looks somewhat rich to him: the S&P 500 is back near 22 times forward earnings, above its 10-year average of about 20, even though earnings have broadly kept pace with the rally.
Kirk sees one possible offset for Britain—a weaker pound under the new prime minister could lift overseas earnings for FTSE 100 companies—but says emerging markets currently look like the better bet.