Strong cashflow and earnings upgrades the key to UK equity value

UK GROWTH

Despite their strong rally over the past year, we think UK equities have further to go.

Our meetings with company management have been encouraging and this is backed up by strong earnings upgrades. Consensus earnings revisions have remained in positive territory since August last year, driven mainly by cost-cutting but also by sales upgrades. The economic picture is less clear, with the UK relatively slow in emerging from recession. However, monetary policy is set to stay accommodative for some time, stimulating retail sales and activity in the housing market. We maintain a preference for companies geared towards a cyclical economic upturn. Industrial stocks such as auto-pa...