Stock picks
From a quality perspective, the UK has a lot of companies with competitive advantages and the ability to make attractive returns on capital. Ninety One cited investment platform AJ Bell as a successful disruptor in a growing UK savings market. Additionally, British pub JD Wetherspoon reinvests in pricing every year to keep costs down for its clients, the firm said. These businesses can deliver compounding free cash flow per share as their returns on capital persist at high levels and defy mean reversion.

Ninety One argued that the UK remains attractive for value investors – not just because of relatively low valuations, but due to the market’s breadth, depth, and behavioural inefficiencies that create mispricings. Its mix of sectors means that opportunities shift over time, rewarding flexible, fundamentals-based investors.

For instance, despite heavy pressure on the travel sector during Covid, low cost airline Jet2’s end-to-end control of the customer journey enabled it to gain market share and emerge stronger. The market has reflected that resilience in its share price, the firm continued. Another top stock pick for Ninety One is UK aerospace company Melrose.

“The stability of some of the country’s large businesses, be it in consumer staples, pharma or retail, offers investors defensive exposures at attractive valuations, as opposed to the premiums that one normally is required to pay for this return profile,” Ninety One said.

Based in London and Cape Town, Ninety One is a global investment manager managing £130.8 billion ($178 billion) in assets.