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EWU: U.K. Stocks Breaking Out

Stuart Allsopp profile picture
Stuart Allsopp


  • We continue to hold outsized long positions in U.K. stocks via the iShares MSCI United Kingdom ETF due to a combination of strong price action and deeply discounted valuations.
  • Down trendline resistance from the 2018 highs has given way which brings into focus the USD32 area. A break above here would suggest a run at the USD35 area.
  • The median U.K. large cap stock continues to outperform capitalisation-weighted indices which we see as a sign of internal market strength.
  • On a relative basis, U.K. stocks are incredibly cheap, compared to both developed and emerging market benchmarks. On a forward PE basis, the MSCI U.K. trades at a 35% discount to the MSCI World and a 12% discount to the MSCI EM, with the current discount the largest in over a decade.
  • Despite large cap U.K. stocks deriving most of their revenues from overseas operations, the ~30% of revenues derived from the U.K. should be supported by the ongoing reopening of the U.K. economy as the Covid vaccination programme remains on track.

UK financial background
Photo by traffic_analyzer/DigitalVision Vectors via Getty Images

We continue to hold outsized long positions in U.K. stocks via the iShares MSCI United Kingdom ETF (NYSEARCA:EWU). U.K. stocks remain the most attractive among developed market indices in our view, and the EWU, which

This article was written by

Stuart Allsopp profile picture
I am a full-time investor and owner of Icon Economics - a macro research company focussed on providing contrarian investment ideas across FX, Equities, and Fixed Income based on Austrian economic theory. Formerly Head of Financial Markets at Fitch Solutions, I have 15 years of experience investing and analysing Asian and Global markets.

Analyst’s Disclosure: I am/we are long EWU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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