UK Stocks Trade at Deep Discounts as International Markets Outperform US

Remy: Welcome to FINTECH.TV, I'm Remy Blaire. The US stock market marked the third consecutive year of double digit gains in 2025, but international stocks did even better, with returns nearly doubling domestic stocks and outperforming the S&P 500 for the first time in years. And this could be the start of a multiyear cycle where international investing is not just about diversification, but also a driver of growth. Well, joining me live at the New York Stock Exchange is Swen Lorenz, CEO and founder of Sarnia Asset Management. It's been great to have you here. Thank you so much for joining me.

Swen: Hi. Good morning. It's great to be here.

Remy: Well, 2026 is well underway. And when we're talking about the markets and opportunity I think diversification is something that keeps on coming up. So when it comes to the UK market, give us an idea of what is actually happening on the ground.

Swen: Well, you can buy into world leading and market leading companies right now at a price earnings ratio of three. And in a way, I could almost stop here now, because in the Western world there is no other place. There is no other major country where you can buy quality assets at such low valuations. think it's a generational investment opportunity, and the UK is currently obviously undergoing some political challenges as well. To put it like that. But in terms of buying assets on the cheap, investing money and diversifying as you, as you rightly put it, into a different market that is running at a slightly different pace than the US. That's the big opportunity right now.

Remy: And you mentioned valuation. So why does the UK market trade at persistently low valuations. Can you walk us through this compared to the US markets.

Swen: Most people will wonder whether it's all down to Brexit. And let's just keep in mind Brexit was ten years ago, so this situation has obviously moved on since then. It is entirely true that the UK as a as a market and as an economy, is somewhat trailing behind the US in terms of innovation, in terms of governance as well. And that that trickles down to boards as well. Boards of publicly listed companies. Capital allocation is much more old fashioned and slow and less aggressive than in the United States. So, for example, many companies are still primarily focusing on paying dividends instead of buying back stocks.
And if your stock is trading at a single digit price earnings ratio, and you've got a yield for government bonds of 5%, it makes no sense in the world to pay out dividends. You should aggressively buy back stocks. That's changing right now. Things are, you know, moving on in the in the United Kingdom. And the opportunity is still early stage. So this is what you have to make use of right now in my view.

Remy: Yeah. And you just mentioned a keyword there. And that is "change." So tell us what you expect to see. Not just in the short term but also the medium and long term.

Swen: So M&A action corporate action is there's a lot going on in the UK, especially because of American companies and American private equity companies moving in and buying these quality assets and market leading companies on the cheap. That's not always good for investors. But at the same time, if you get a bid for a company that you own shares in and you get overnight 50% or 70% more. Who's to complain? Um, and in terms of what else is moving on where the opportunity lies? Boards, I think, are currently starting to embrace global best practices for governance. So capital allocation, executive compensation in a, you know, structured in a more effective and aggressive way. Um, all of these subjects are advancing I think this opportunity is only going to last for 3, or 4, or 5 years, because eventually the market will have rerated to a point where prices are comparable to to other markets. So, you know, as I said before, I'm sounding like a broken record. This is an opportunity to look at right now.

Remy: Yeah. And of course when we're talking about markets it's all about performance. So I understand you've said that you strongly believe that to meaningfully outperform the market, you actually need to be right about something that others do not yet believe in. So what are you focused on?

Swen: Absolutely. So I call this non-consensus viewpoints. You don't just have to be right. You have to be right about something that the market hasn't recognized yet in '22. And sort of like from '22 to '24 I was going on and evangelizing about UK banks. And these stocks have done phenomenally well back in '22. No one wanted to hear about that. I would say right now, when it comes to the UK market and non consensus viewpoints, look at pubs, look at housebuilders. These are in a way quite basic industries. the UK, for example, has the worst housing shortage of any major European country. The government is now pushing to change that and these companies will benefit from it and they're trading at ridiculously low valuations. So I think this is where in the next couple of months and years, that's where the opportunity lies.

Remy: Well Swen, thank you so much for joining me here at the New York Stock Exchange. And thank you so much for sharing your insights and perspective regarding the UK market, which is just across the pond.

Swen: Pleasure to be here. Thanks for your time.