Fidelity's Clark: Why I am backing troubled Tesco

ON UK INCOME

Fidelity income manager Michael Clark is sticking with unloved Tesco - despite its recent woes - and is seeing better value in UK large caps than their small-cap peers.

Investing in the UK equity income market remains a very fruitful strategy. There is generally a good breadth and depth of income generating stocks available, and yields remain attractive and well supported. Importantly, good quality stocks have not been drawn down by a near-zero interest rate policy, unlike bonds. UK equities had a strong run in 2013, surpassing the previous market peaks of 1999 and 2007. However, today’s market is comparatively more supportive as the P/E ratio is lower than it was in 1999 and 2007. Indeed, the cyclically adjusted P/E (CAPE) of the FTSE All Share is curr...