Anthony Bolton, Britain's most high-profile investment manager, believes the UK stock market has now hit rock-bottom, and has begun betting on a recovery with his own money. Mr Bolton, widely accepted to be the most consistently successful British fund manager of the past 20 years, said yesterday that he believed share prices in the UK would now begin rising again, albeit slowly and with continued volatility.
"For the first time in a couple of years, I've begun to feel optimistic: the markets of the past two to three days have all the signs of a low," Mr Bolton said. "In the last weeks, we have looked into the abyss and stepped back."
Mr Bolton made his name running the Fidelity Special Situations fund, earning an average annual return of more than 20 per cent during his 27-year tenure – significantly ahead of any other rival. Though he stepped down from active fund management in 2006, Mr Bolton remains a senior strategist at Fidelity Investments, Britain's biggest investment manager, and his views are very widely followed.
Mr Bolton said he was so convinced that the worst of the stock market's decline was now over in the UK that he had begun investing his own money in shares, buying equities for the first time in several years. "I made my first purchases a couple of weeks ago and I added to them on Tuesday," he said.
Mr Bolton's view, which is shared by other fund managers at Fidelity, is based partly on his contrarian instincts, but also on the current depressed valuations of many companies. Mr Bolton said that investorsentiment indicators were now so depressed that there was no further for confidence to fall and that he had also identified several sectors of the market which offered better value than at any time for a generation.
Analysis conducted by Fidelity shows that the value of many companies, particularly in bombed-out areas of the stock market such as retail, media and property, suggests that even were there to be a recession as severe as the downturn seen in the early 1990s – a more punishing corr-ection than the vast majority of economists are currently predicting – shares would still prove to have been oversold.
"My feeling is that we're going to have a recession, but not a super-bad recession," Mr Bolton said. "Shares in some consumer-facing firms are as cheap as I have seen them in my lifetime."
Fidelity's star fund manager said that the stock market's recovery would be a slow one and that further setbacks were to be expected. But he now believes the UK market has fallen so far that additional shocks, such as any new setbacks that might occur with the US bailout plan, would not necessarily derail the upswing.
"This bear market has now been running for 15 months, which means it is long in the tooth by historical standards – there will be a protracted and slow upturn and I'm not expecting a fast recovery," he said. "But it doesn't have to be one single event that causes the market to turn."
Mr Bolton said sectors such as financials, which began falling before the rest of the market, were likely to lead the recovery, with banking consolidation in the UK, for example, working in favour of many companies. He warned that areas such as commodities that have only begun falling in recent months would take longer to recover. "I wouldn't rush back intonatural resources," he said.
Mr Bolton's decision to publicly call the bottom of the market will be welcomed by many investors, particularly given the widespread regard in which he is held.
However, his stance will also be considered brave, with many other investment professionals and economists remaining bearish about the pros-pects for global markets.
Robert Talbut, the chief investmentofficer of Royal London Asset Man-agement, said policymakers were not yet doing enough to justify investors taking a more confident outlook in the near term.
"While the US authority's initiative can be seen as part of the necessary overall solution to this episode, on its own it falls very short," Mr Talbut said.
Paul Dales, an economist at Capital Economics, said: "With American house prices yet to reach a floor,further bank losses and equity weakness certainly seems likely."
Silent assassin: 'Heads should roll at banks'
Britain's bank bosses must face up to the failures of the past year, with some high-profileexecutives likely to be forced out of their jobs, Mr Bolton, known in the City as the "silent assassin", said yesterday.
The Fidelity manager saidinvestors were entitled to ask why bank bosses who had presided over major declines in shareholder value were still in their jobs. "It's a good question," he said. In particular, he warned that Sir Fred Goodwin and Sir Tom McKillop, the chief executive and chairman of Royal Bank of Scotland, were unlikely to survive the fall-out from the credit crisis, which has hit the bank particularly hard after its purchase of ABN Amro a year ago. On the Lloyds-HBOS deal, Bolton said he is not ruling out a renegotiation of the terms Lloyds is offering.
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