UK Small Companies' valuations seem highly attractive for long term investors

[ACooke]

3 hours ago, Spekulatius said:

OT -

Digging into this book about Spirax- Sarco, which you can order for free (!) from the company. Ordered it a week or so ago and it just arrived today. My wife thinks I am crazy.

https://spiraxhistory.subscription.expert/

 

I got this in the mail today, too.

Pretty awesome quality for something they're prepared to both give-away and catapult to the other side of the world.

[ValueArb]

On 5/29/2023 at 11:20 AM, Spekulatius said:

I actually struggle with the FX aspect of Uk small cap stocks. The GBP is up almost 20% against the USD from the lows, so depending on when an Uk company reported and how much of their revenue are outside the UK, you need to make huge adjustments. These currency fluctuation are also quite damaging to the Uk economy, again similar to what happens in EM’s. They basically  increase the cost of capital. Then you have the 8.7% inflation issue.

 

I just run a Greenblatt /magic formula like screen for some counties in Europe and get many hits in the UK but also Italy. I have in the past done better in Italy in the the Uk, but there are quite a few small cap pot. gems in both countries.

 

Anecdotally I've been told the magic formula was quickly traded away in the US after the book was released, but still works in smaller European countries. Either way it's likely still an excellent screen everywhere for the dedicated analyst who isn't going to blindly buy everything that shows up on it.

 

This thread has been great but I'd also like to point out that smaller caps should always offer higher returns over long periods due to the Illiquidity Factor, which to my understanding is the strongest factor for market beating returns. Again it all comes down to being a good analyst putting in the research work to be able to separate out the chaff (and frauds) from the wheat. 

Edited July 23, 2023 by ValueArb
thread has been great, not just interesting