BlackRock says some shares still cheap
LONDON (Reuters) - Equity market valuations are still cheap in spite of the recent rebound, but investors can expect more volatility for the rest of this year, says top-rated BlackRock UK fund manager Mark Lyttleton.
"Stock market valuations look quite attractive. You can buy a number of companies on single-digit p/es (price/earnings ratios) with nice dividend yields," he said at a briefing on Tuesday.
Stocks among the top 10 positions in Lyttleton's 1.5 billion-pound BlackRock UK Absolute Alpha fund include Tesco (TSCO.L), Vodafone (VOD.L) and BAE Systems (BAES.L).
He said many companies are now in a stronger financial position than they were six months or a year ago.
"Some companies we've been buying, the stock market has said 'you're going bust and the credit markets are closed' and the share price has fallen 90 percent," he said.
"Actually the credit markets aren't closed and companies can do rights issues and restructure balance sheets."
Britain's FTSE 100 .FTSE share index fell by almost a third last year on fears of a prolonged economic downturn.
However, since hitting a low on March 9 it has risen by around a quarter on hopes that government stimulus moves may revive economies sooner than previously expected.
VOLATILE
Nevertheless, the second half of the year is likely to be volatile as confidence in an economic recovery either grows or wanes, he added.
"I think over the next six to 12 months (there'll be) continued volatility in stock markets with a small upwards bias, and (we'll) look to buy in on any significant weaknesses," he said.
"Shorts (betting on a lower price for a security in the future) are quite tricky at the moment. Everyone is feeling there are 'green shoots' but I think that will change over the next few months as a bit more reality comes into the equation."
He is "cautiously optimistic" on the global economic outlook but said it is still difficult to ascertain the level of economic activity.
"In the next six months there will be moments when people feel fairly uncomfortable about the global economic picture and other times when people continue to take an optimistic view," he said.
"Companies themselves when we talk to them don't know either. You hear one positive story one day and a negative story the next day, sometimes in the same country and industry." Continued...
