Higher oil prices and political uncertainty mean that the UK equity market is suffering from the summer doldrums, not helped by higher interest rates. But some of the bigger companies – as well as many smaller ones – are undervalued, taking into account their future potential profits. Some, such as banks, have exceeded forecasts by considerable margins.
I believe that in current stockmarket conditions, investing in undervalued shares could prove very profitable. I particularly like Edward Bonham Carter's Jupiter under-valued assets fund, which is AAA-rated by S&P.
The fund's performance since launch has been excellent relative to the market although recently it has lagged a bit. However, I now believe that this fund will recover more quickly than most other funds and over the next one or two years should show good returns for investors.
About a quarter of the fund is invested in financials, with a further quarter in cyclical services. The balance is spread mainly between non-cyclical services, basic industries, natural resources, non-cyclical consumer goods and general industrials.
Some of the bigger holdings include Bank of Ireland, Lloyds TSB, Prudential, BP and Shell, all of which are expected to continue benefiting from current market conditions. I recommend this fund as part of any UK equity portfolio.
Jupiter Asset Management under Bonham Carter's skillful leadership and talent for attracting top investment managers is now quite rightly one of the most popular fund management groups with IFAs. The other Jupiter funds I particularly like in the current environment are financial opportunities, fund of investment trusts, European special situations and the other European unit trusts.