Income investors have rarely had it so good. Whether through cash, bonds or shares, obtaining an income return of more than 5pc is easy at present. Even some current accounts pay 3.5pc interest on cash balances.
Bear with us: in today’s column, Questor is recommending the shares of a consumer brand long past its heyday, with two decades of sluggish sales and falling profits to prove it.
The UK stock market is dirt cheap. While practically every other major index has risen by over 50pc in the past five years, the FTSE 100 and FTSE 250 are up by just 14pc and 11pc respectively over the same period.
The FTSE 100’s lacklustre performance over recent years means the task of unearthing cheap stocks is fairly straightforward. Indeed, the large-cap index has risen by just 10pc over the past five years.
Smaller companies are inherently riskier than larger ones. They lack the geographical, customer and product diversity, as well as financial strength, of their large-cap peers. This means that their progress can stall following disappointing news that would probably be little more than a “bump in the road” for a larger rival.
Shares in Finsbury Growth & Income, a £1.6bn former top-performer managed by Nick Train, have fallen 7pc below the value of its blue-chip consumer stocks, making it by one measure the cheapest investment trust in the UK.
Investment trusts are currently so cheap that what would normally be considered extreme discounts are failing to excite even the most ardent of bargain seekers. Indeed, it would be unsurprising for potential investors to dismiss any listed fund that fails to trade at a double-digit discount, such is the abundance of ultra-cheap opportunities available.