Investments  

Undervalued firms are ‘global champions’

James Griffin, manager of Fidelity’s MoneyBuilder Growth fund, and portfolio manager for Fidelity, said in a low growth environment, companies with the means to fund their own growth such as some of those listed FTSE 100 were in a strong position.

He said the FTSE 100 has underperformed the FTSE 250 for over a decade leaving many larger companies at very appealing valuations

He claimed companies with big balance sheets held the upper hand.

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Mr Griffin said: “In the bull market years a common criticism of large companies was ‘elephants can’t run’.

“A large company supposedly had more limited room for growth compared with more nimble, smaller companies. As a result many of these larger companies were derated over the last decade. For example, the share price of Glaxo is the same as it was in 1997.”

The FTSE 100 contained UK ‘global champions’ which could outsmart the recession such as Rolls Royce, Diageo, GlaxoSmithKline, Shire, WPP, BG, Johnson Matthey and Rio Tinto and Anglo American.

Mr Griffin said: “Of course a great company does not make a great investment if the share price already discounts a lot of the future growth prospects. Valuations of tobacco companies, for example, are now at significant premiums to historical levels. The good news though is that the FTSE 100 has underperformed the FTSE 250 for over a decade leaving many larger companies at very appealing valuations.”

Tristan Freer, director of Bank House Investment Management in Cheltenham, said: “It is still too early to make these kinds of calls. Many investors are wary of investing in UK companies at the moment.”