IN THE BACK
End of year sale
TB Amati UK Listed Smaller Companies ’ Scott McKenzie says investors in the UK don ’ t have to choose between value and quality , as many stocks now offer both
It has been a challenging year for investors in UK smaller companies , with political uncertainty , a weak pound and concerns about a recession leading to a buyers ’ strike in the asset class . We have seen ongoing liquidity pressures as asset allocators reduce their exposure to UK equities . These factors mean there are exceptional opportunities in highquality companies , where shorterterm macro factors have led to a de-rating . The following three companies benefit from high profit margins and strong balance sheets , and should enjoy a re-rating when investors ’ appetite for UK PLC returns .
OSB is a leading specialist lender in buy-to-let mortgages . With the housing market set to slow from elevated levels , a meaningful decline in new mortgage origination is expected next year . However , OSB will benefit from loans that are due to be refinanced in 2023 , as well as a highly profitable existing book . In addition , the bank has built up a considerable capital buffer and a robust asset backing , which is unlikely to come under threat , even in tougher markets . This means it can increase loss provisions if required , while returning healthy levels of capital to shareholders .
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