Americans love their Star-Spangled Banner, the French are obsessed with national pride but we Brits have a problem with patriotism. A recent poll showed that only 20 per cent of us feel really proud of our country, with numbers falling even further among the young.
Reluctance to recognise our strengths has extended to the UK stock market. Prices are cheap, yet many savers continue to put their money elsewhere, while pension funds allocate less than 5 per cent of their cash to home-grown stocks.
A quick glance at valuations highlights the chasm between here and the US. Financial professionals pore over data showing how much investors are prepared to pay for stocks in different parts of the globe but, in a nutshell, US stocks are dear and ours are cheap. American markets have defied gravity in recent years, sent skywards by the so-called Magnificent Seven – Amazon, Apple, Microsoft, Facebook’s Meta, Google’s Alphabet, AI specialist Nvidia and Elon Musk’s baby, Tesla.
Now, however, sentiment may be shifting. US technology stocks are wobbling and forward-thinking investors are beginning to appreciate what UK markets have to offer.
The FTSE All Share index – which covers more than 600 London-listed stocks – is trading at an all-time high. Its better-known cousin, the FTSE 100, comprising Britain’s biggest listed firms, has also been scaling new heights this year.
Their steady growth reflects a growing belief in the power of UK plc, led by a cadre of top businesses whose innovation and drive are increasingly recognised here and overseas.
On drugs
Drugs giant AstraZeneca tops the list. Now the largest company on the London market, AstraZeneca is valued at almost £200billion, with each share changing hands at more than £120.
Formed 25 years ago from the merger of Swedish Astra with UK firm Zeneca, the company has come into its own under chief executive Pascal Soriot. When Soriot took the helm in 2012, AstraZeneca shares were £30. Two drugs accounted for around a third of sales and patents were soon to expire. Sensing the firm’s vulnerability, US rival Pfizer pounced with a £55-a-share bid. The approach was rebuffed but many shareholders were unhappy, worried that Soriot would be unable to go it alone.
They were wrong. The stock has soared since then and Soriot hopes almost to double sales from $45billion (£35billion) last year to $80billion (£60billion) by 2030. This ambition is fuelled by a pipeline of treatments for conditions from obesity to prostate cancer, buttressed by robust demand for existing medicines, including diabetic pill Farxiga, which single-handedly generated revenues of almost $6billion last year.
Creating new drugs is not easy, however and stock market reaction can be punitive when trials go awry. Disappointing results for a potential lung cancer medicine proved the point this month, sending AstraZeneca shares down more than 6 per cent in a matter of days. The stock could rebound, if Soriot achieves his stretching targets. But there are almost certainly bigger bargains to be had on the UK market.
Rolling up
Rolls-Royce is a very different beast but its shares are also around an all-time high. following a turbocharged reboot under chair Dame Anita Frew and chief executive Tufan Erginbilgic.
Not to be confused with Rolls-Royce Motor Cars, owned by BMW, Rolls-Royce plc is an engineering group, specialising in aeroplane engines, military defence and energy. Customers span the world but the group went through a long period of underperformance and, when Erginbilgic joined in January 2023, the shares were less than £1. Having described the business as ‘a burning platform’ in need of radical surgery, Erginbilgic embarked on an energetic programme to put Rolls back on track.
The shares have soared to close to £5 and there are high hopes for the future. The group expects to deliver profits of more than £2.1billion this year, a fourfold increase in just two years. There are even plans to reinstate dividends, which were flat for years and suspended entirely in 2020.
The question now is whether there is still more mileage in the stock. Erginbilgic has plenty more to deliver over the next two to three years and his turnaround programme has been given extra ballast by a rebound in the travel business, as Rolls-Royce makes and maintains engines for long-haul planes. It’s lucrative work but highly complex and slip-ups can arise. Earlier this month, a part failed on a Cathay Pacific flight, prompting the airline to call for replacements, with Singapore Airlines adding that it was inspecting planes as a precaution. Rolls’ shares fell on the news, then recovered but the incident underlined the challenges that Erginbilgic faces. If he achieves his aims, the shares should deliver further gains. Any further problems and the stock could suffer.
Drugs and engines can be risky but several other UK stalwarts are at all-time highs, including retailer Next, online car dealer Auto Trader and Haleon, which makes healthcare products from Sensodyne toothpaste to Day Nurse.
Still in fashion
Next is an extraordinary business. Under long-standing boss Simon Wolfson, the retailer has consistently delivered the goods, keeping customers happy, staying ahead of trends and driving profits higher. When Wolfson took the top job in 2001, the shares were around £8. Today, they are close to £105 each. Resolutely middle-of-the-road, the group has outpaced trendier competitors and managed to hold its own in the fickle world of fashion. Constant investment in e-commerce has certainly helped, making Next one of the UK’s biggest online retailers. With strong half-year results expected this month – and more to follow in 2025 – Next shares should continue to deliver long-term, steady growth.
The open road
Auto Trader dominates the online car market. Ten times larger than its nearest competitor, the company can trace its roots back to 1973 but joined the stock market in 2015 at £2.35 a share. Today, the price tops £8.80 and several City analysts believe it has further to go.
Last year alone, Auto Trader sold more than seven million used cars and another two million new ones, despite challenges in both sectors. Longer-term, chief executive Nathan Coe is confident of further growth, as the company broadens its range, invests in technology and expands its customer base.
Gains not pains
Haleon is something of a stock market newcomer. Spun out of drugs group GSK in July 2022, the firm caters for everyday healthcare needs and its brands are among the best known in the world. Voltarol for back pain, Panadol for headaches, Tums for indigestion and a whole suite of vitamins and supplements that cater to the wellbeing movement.
Priced at £3.30 when they split from GSK, Haleon shares had a rocky market debut but have been storming ahead over the summer to almost £4, spurred by an upbeat statement from boss Brian McNamara last month, decent dividends and growing confidence among investors about future growth. There have been worries that consumers will try to save their pennies by trading down from top brands to cheaper alternatives, but Haleon is proving its resilience and benefits from a worldwide presence across more than 100 countries. Huge sums are spent on research each year as well, to ensure the group’s top-selling products deserve their premium pricing.
Data and defence
LSEG, formerly known as the London Stock Exchange, is another UK winner. Once focused on listing UK stocks, the firm has been transformed into a global provider of data and infrastructure to the financial services industry.
The shares have delivered huge gains along the way, soaring from £3 to more than £100 in the past 20 years. Many investors associate LSEG with the Stock Exchange, which has suffered from a dearth of new companies listing in London. LSEG’s business stretches far beyond the London market however and today, the company has more than 40,000 customers in 70 countries. While the shares may be out of reach for many investors, LSEG is banging the drum for Britain and highlights the way that a firm can adapt, evolve and reinvent itself to keep ahead in a fast-moving world.
BAE Systems is also making waves across the globe, proving its mettle as a top producer of defence equipment and vehicles, designed to keep soldiers and citizens safe. Russia’s invasion of Ukraine put defence in the spotlight, forcing the UK and other governments to reassess their priorities. Middle East tension and Chinese muscle-flexing have underlined the need to spend big on defence and orders at BAE are soaring. The British Armed Forces are a major customer but the group’s sophisticated kit has gained international renown and the shares have gone from strength to strength.
At £3.89 during the pandemic, they have soared to more than £13. Future growth will almost certainly be more muted but, in a dangerous world, BAE shares have long-term appeal.
Household favourites
Back in consumer land, Tesco and Marks & Spencer have not yet breached their all-time highs but they are heading in the right direction. Both have battled with increased competition, changing consumer habits and tough economic conditions. They have lost their way at various times but staged a strong recovery over the past two years. Tesco shares are up nearly 80 per cent to £3.73. M&S has more than tripled to £3.66 since 2022. Both have benefited from keen-eyed bosses who have focused on working out what the customer wants and striving to provide it, both in store and online. Recent results have been encouraging but there should be more to come. Tesco is the largest UK grocer by a long way and M&S is a household name, still beloved by millions here and overseas.
Mr Kipling owner Premier Foods is about as British as it is possible to be. Exceedingly good cakes aside, the group’s brands include Ambrosia, Bisto and Angel Delight, Batchelors soups and Sharwood’s sauces. Once a solid and reliable business, Premier came a cropper when it bought Hovis-maker RHM for £2billion back in 2006, a disastrous deal which sent the shares plunging.
Recovery has been steered by food industry veteran Alex Whitehouse, on whose watch profits have tripled and the group has showed it can move with the times, acquiring Indian food specialist the Spice Tailor and launching plant-based division Plantastic.
Dividends have been reintroduced, recent updates have been encouraging and the shares have soared from 24p in 2020 to £1.83. with more upside likely over the next few years.
A good yarn
Bloomsbury is another great British winner, whose long-standing boss regularly exceeds expectations. Nigel Newton co-founded the publisher in 1986 and remains in situ to this day. Most chief executives last less than five years but no one is complaining about Newton, whose team has an enviable track record for best-sellers. While Harry Potter is Bloomsbury’s best-known find, the group has numerous money-spinners in its stable, from Paul Hollywood’s Bake to romantic fantasist Sarah J Maas, beloved by the Tik Tok generation. The demise of reading for pleasure has long been predicted but book sales soared during the pandemic and interest persists. Newton has added online academic publishing to the business, as well, broadening its appeal here and abroad.
Even as the FTSE All Share has been forging ahead, its junior cousin, Aim, continues to struggle. The Aim index has slumped more than 40 per cent in the past three years, hit by slowing economic growth and a frustrating lack of investor interest in smaller companies. There are some spectacular outliers however, led by small business energy supplier Yu Group and sophisticated communications firm Filtronic, once dismissed as a basket case. Both firms have risen more than seven-fold since 2021 and remain committed to delivering growth.
Stock market winners come in all shapes and sizes but they share certain key features. Led by shrewd bosses, they retain an eagle-eyed focus on customers, a close grip on the financials and a determination to keep abreast and, ideally, ahead of the times. Many UK firms display all these characteristics and more. As they attract the attention they deserve, our markets should start to recover from years of neglect. About time too.
