Declining business? Call it cigar-butt investing.
Updated: Dec 31, 2022
Life has certainly not been easy for the economy and markets this year. In the UK alone, we have inflation still at double figures; negative GDP growth now persistent enough to be considered a technical recession; and more recently a strike in every industry under the sun. Combine this with the recent bitter cold snap and it wouldn't be that far-fetched to say this is perhaps a modern Winter of Discontent.
In spite of all this, the FTSE 100 - the main market index representing the performance of the UK stock market - has outperformed the rest of the rich world, eking out a positive return of 0.9% from the end of 2021 to the 30th November 2022. Meanwhile, blue-chip indices like the S&P 500 and NASDAQ have declined 15% and 27%, respectively.
Most other UK indices have still been subject to the same decline as the vast majority of global markets. The FTSE250 and FTSE350 have lost 20% and 2.7% in value, respectively, along with MSCI UK falling 4.5%.
How things will play out in 2023 is anyone's guess. On the plus side, however, one cannot help but think of stocks that have perhaps been oversold in this period, presenting attractive mispricings.
With this in mind - and being from the UK myself - I started thinking about whether there were any companies I know well that fit this criteria. Better yet, any that could weather the current economic turmoil and make a comeback on recovery.
Enter ITV Plc, an integrated British television broadcasting company, whose TV shows I proudly grew up on. A constituent of the FTSE250, this company is a dominant player in the UK’s Television Broadcasting sector. Their timeless portfolio of free-to-view shows including Love Island, Saturday Night Takeaway and I'm a Celebrity... Get Me Out of Here!; a sustainable high dividend yield; and favourable intrinsic value, all appear to offer great upside.
In November I presented at the London Value Investing Club, an event held by the Founder and CEO of CityFALCON, a London-based Fintech startup focused on converting unstructured data into structured information for financial and business due diligence. In this presentation, I show just how the story of ITV could play out, and why I think this is a company to look out for.
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This post is not intended as investment or financial advice and should be used for recreational purposes only. Any financial actions taken using the content of this post are done so at your own risk, and I am not liable for any gains or losses incurred.
I currently hold shares in at least one of the stocks/companies mentioned in this post.