The Investing Show: Why value investing beats the market

Published on Jul 30, 2016

The Investing Show: Why value investing beats the market
Simon Lambert, Richard Hunter and Nick Batsford are joined by Tim Price, of PFP Wealth, who reveals value investing’s winning formula
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0:05welcome to the investing show where we discuss the news and investing ideas to
0:10help you make more of your money
0:11i’m simon Lambert this is money and with me in the studio I’ve got Richard hunter
0:15head of equities at Hargreaves Lansdown Nick moose batsford CEO of tip TV coming
0:20up later on today show we’ve got Tim price of PFP wealth is coming to talk to
0:24us about Y value works
0:26why investors should be rethinking how they invest where you can look for
0:30winning value at the moment we’ve also got the money tip of the week which has
0:34got some savings accounts from some graph or unusual names but first a quick
0:38look at some things that caught our eyes this week
0:41Richard you going to talk to us about the footsie and how it’s completely
0:43dominated by some sectors on you
0:45yeah that’s right and Andy chairs we were speaking previously on on one of
0:50these shows about Joe what factors move markets and what factors move share
0:54prices
0:55I thought it might be useful just have to have a look at what what markets are
0:58because i’m generally speaking when you read in the press or read online indeed
1:02about the market in the UK
1:04we’re talking about the foot you 100 but the question is often asked why has the
1:10future 100 underperformed other developed economies and some of that is
1:14down to the way that it’s made up so we’ve got two slides the first of which
1:18is to look at the footage 100 by sector and that there’s a you know it’s a big
1:24chunks of the market they’re on there
1:26there are indeed in fact it’s only way to change we’ve been saying for some
1:29considerable time now that the the top three sectors in the foot 100 banks or
1:34sand miners the mining sector has recently just dropped out of the top
1:38three it’s all about 7.2 percent but numberless not in the top three
1:42interesting that at one point banks or minus had fairly equal proportions of
1:47the index between itself but what it does show and the simple purpose of that
1:51graph is in those three sections alone account for more than a third of the
1:55value of the foot you 100 so inevitably if you’re trying to work out what’s
2:00holding the market back or indeed White’s moved
2:03there’s a third of a chance that you’re gonna have to look any further
2:07you would also then expected on the basis there are a hundred stops within
2:11the first 100 students making a hundred one cuz there’s two lines of
2:16fucking shell and that they wouldn’t be such as a kind of waiting between any
2:22given stocks and the next slide which is not quite as complicated as it right
2:26first look shows why i was going to just keep it simple i was going to make it in
2:31the top five stocks but time from a very simple perspective on your phone and and
2:35be 80 at the bottom know that they have
2:37there’s just nothing between and so those in the top six stocks and we
2:41currently have these are the companies that we read about when we read in a
2:44market report we’re listening to market report these are the companies that if
2:47their share price moves a decent amount has the power to move the whole index
2:50doesn’t it absolutely and in the one in the same way we just saw the three
2:53sectors account for thirty six and a half percent of the footsie just these
2:57stocks alone account for twenty-eight percent of the index so that’s a no
3:02again getting on for a third just these six stocks and in fact in terms of the
3:07very top one rolled out a shell
3:09that’s coming its market value of hundred 21 billion or six and a half
3:13percent that’s without the BG group going through which is set at the bottom
3:19of the slide would add another 30 billion or two percent so again if we
3:24have looked past the sectors because the market is moved today
3:28it’s almost worth putting these somewhere in your subconscious as a
3:32trigger because any sort of bird decent movement in any of these shares more
3:37than likely have a disproportionate effect on the index
3:42I think the other thing that is worth noting here because it is very visible
3:48these are obviously the biggest companies in the fortune 100 and they
3:52change to be pretty much
3:55globally focused and they also tend to be fairly cash generative and if you
4:00look at the current dividend yields of those stocks
4:02bearing in mind that the foot 100 on average is yielding about three and a
4:07half percent obviously getting next to nothing on cash in your bank or building
4:11is our society at the moment there are some fairly pun children there from
4:15these cash generative businesses equally interesting thing is what the market
4:20commonly think of those no one is shouting from the rooftops
4:23in terms of event any of these which could suggest that a few of them are
4:27priced pretty much where they should be I mean obviously there are individual
4:31stories you’ve got to just a cautious by shell and hold for BP
4:36we all know about oil similarly we’ve got to hsbc recently weakened to a weak
4:42hold obviously there’s the strategy day still being judged electric students
4:46well as whether they do or don’t remain in the UK and then of course
4:51so in terms of dat british american tobacco that they’ve been other various
4:56parts of my education flying around this the globe at the moment as you are
5:01likely to have with any sort of tobacco shares but again it is worthwhile having
5:05a kind of exercise subconscious picture of factors that might be affecting the
5:11movement for each 100 quite apart from the usual list of the China’s and the
5:16u.s. is and the greases and so on then you can be thinking well how much is
5:20what’s happening at this index level going to affect my investments how much
5:24have I got in those and also if you hold a track of funds then this is a quite a
5:29lot of what you’re buying really isn’t it
5:30absolutely and you might also find of course structure even if you a fan – or
5:34foot 100 income fund for example just looking at those punches huge alone
5:39you may well find that particular fund is loaded with some if not all of those
5:43storms place you could talk to us about the party so I am its sales misery
5:49reporting this wednesday and I just sort of picked a few thoughts from the major
5:55newspapers and just wanted to create a picture of perhaps is not quite such
6:00good news ahead and spicy sainsbury’s losing the fight against forward in
6:04sales
6:05red generate the weekend headlines same reason sometimes brace for the sixth
6:09consecutive quarterly fall of sales price more and falling commodity prices
6:14continue to by

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