As the U.K. finally emerges from lockdown, Britain’s stock market is picking up steam. These 7 British blue-chip stocks are leading the way.
The United Kingdom is open for business. Kind of.
After a three-month lockdown of the world’s sixth-largest economy – the country’s third lockdown since the Covid-19 pandemic began more than a year ago – England, Scotland, Northern Ireland and Wales are allowing non-essential businesses such as pubs, restaurants and other retailers to reopen for the first time since early January. Perhaps not coincidentally, the London Stock Exchange is rallying. And some of the largest British blue-chip stocks are leading the way.
The lifting of lockdown restrictions ends one of the most stringent economic shutdowns in the world. While the British Prime Minister Boris Johnson isn’t turning the tap fully on, instead opting for a phased reopening like most U.S. states, the plan is to lift all lockdown restrictions in England by June 21, with the rest of Britain operating on a similar timetable.
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The easing of restrictions is a much-needed life raft for the U.K. economy, which is in a deep recession after four straight quarters of declines, including by 7.3% in the fourth quarter of 2020. By comparison, the U.S. economy declined only 2.4% year over year in the fourth quarter.
Not surprisingly, the London Stock Exchange has not rallied as sharply as the S&P 500 or many other global stock markets in the last year. Since the March 2020 bottom, British stocks are up 34% – not bad, but tepid compared to the 79% advance in the S&P during that time.
British stocks as a whole, as measured by the benchmark FTSE 100, currently trade at a price-to-earnings ratio of 24.6, well below the historically high 42 P/E ratio in the S&P 500. And after falling in January on the heels of the country’s third lockdown in a year, the index has risen more than 8% to hit new all-time highs this week.
You don’t have to look far to see which British stocks are leading the way. Some of the more recognizable U.K. companies, with the largest market caps, are up big since the start of February.
With that in mind, here are year-to-date returns for seven of the largest British blue-chip stocks by market cap (listed from largest to smallest), most of whose names you’ll recognize.
7 British Blue-Chip Stocks on the Rise
Linde (LIN)
Market Cap: $149.5 billion
YTD Return: 8.6%
Rio Tinto (RIO)
Market Cap: $131 billion
YTD Return: 9.2%
HSBC Holdings (HSBC)
Market Cap: $121 billion
YTD Return: 14%
BP plc (BP)
Market Cap: $86.7 billion
YTD Return: 24.5%
Prudential (PUK)
Market Cap: $56.3 billion
YTD Return: 16.8%
Vodafone (VOD)
Market Cap: $52.2 billion
YTD Return: 13.6%
Barclays (BCS)
Market Cap: $44.2 billion
YTD Return: 29.7%
All but two of those stocks has outperformed the S&P (+10.3%) so far this year, and all have outpaced the Nasdaq (+8.3%). More importantly, each of them likely has more room to run than U.S. large caps, trading at an average share price of less than 14 times forward earnings estimates. With the British economy on the brink of a major bounce-back – U.K GDP is expected to grow 4% in 2021 and another 7.3% in 2022 – all seven of these hiding-in-plain-sight British stocks look like bargains.
So if you’re worried that the U.S. stock market looks a bit too frothy these days, and would prefer to invest in an economy that’s at an earlier stage of its recovery, British stocks look like a good place to be right now.
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