A massive shift in the valuation profile of the UK market in recent years has meant mega caps are looking "mega cheap", according to Leigh Harrison, head of UK equities at Threadneedle.
Harrison said that the two main drivers of this shift in valuations were superior earnings growth in mid and small caps and a wave of takeovers and buyouts that have swept thought the lower tiers of the market. He said: “Seven years ago the top 15 companies in the index were trading on a forward PE of more than 20 times while, outside the FTSE 100, no tier traded at more than ten times. "Now, the top 15 are on 11 times and none of the tiers below the 100th stock trade on less than 15 times.” Looking at the role of private equity, Harrison noted that the number of deals involving these...
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