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Some investors obsess about picking hot stocks. Often, a better approach is picking countries to invest in and seeking market rather than company exposure. 
One of my better ideas for The Bull early this decade was buying United States equities. In broking parlance, I went “overweight” US equities after the 2009-08 Global Financial Crisis, believing they were undervalued and stuck with the idea for much of this decade.
I nominated the iShares S&P 500 ETF (IVV) as a cheap way to gain exposure to US companies.  The ASX-quoted ETF returned 13 per cent annually over 10 years to December 2018.
Thematic ideas based on countries or market themes can make a big difference to portfolio returns. Such ETFs can be used passively; for example, holding IVV in the portfolio core for US equities exposure. Or tactically to take advantage of “special situations” when value emerges.
Having trimmed my exposure to overvalued US equities in 2018, I have become bullish on UK equities. Make no mistake: the UK looks like a basket case as debate rages over the country’s exit from the European Union (Brexit) and whether the separation will be “hard’ or ‘soft”.
The crushing rejection this week of UK Prime Minister Theresa May’s Brexit plan triggered political upheaval and suggested the EU separation will be disorderly. Some commentators have described Brexit as the deepest political crisis in the UK in more than half a century.
Markets hate uncertainty and Brexit provides tonnes of it. The FTSE 100 index, the key barometer of UK stocks, is down 11.25 per cent over one year. The index has shed almost 1,000 points since Brexit was first announced and is back at mid-2016 levels. 
Value is improving. The UK market is trading on about 12 times forward earnings compared to 14 times for European stocks (ex-UK) and 17 times for US stocks, on some broker estimates. The Australian market is on about 15 times earnings or right on its historical average. 
Simple index comparisons can deceive because they are affected by index composition, currencies and other factors. Always look beneath the “bonnet” to understand companies in the index and how their valuations compare to peers in other markets. 
Consider Lloyds Banking Group plc. The UK giant trades on a trailing PE of 9.7 times at the current price. In contrast, ANZ Banking Group in Australia trades on 12 times and US bank Wells Fargo is on 11.2 times. Lloyds and other large UK banks look interesting. 
Several UK stocks are trading at discounts to their comparable global peers. A discount is warranted given Brexit uncertainty. But the gap looks excessive in UK banks and other sectors.
Fund flows are another signal. Billions of pounds poured out of UK equity funds in 2018 as fund managers trimmed their exposure because of Brexit uncertainty. Surveys of manager intentions suggested few contrarians were increasing UK equity exposure last year. 
Everywhere one looks, sentiment towards UK equities is being affected by a daily barrage of Brexit bad news. There’s even talk that the Brexit decision could be reversed, although it is hard to see that work. With so much uncertainty, there is a buyer strike in UK equities. 
Granted, finding a catalyst to re-rate UK stocks is hard. The UK is due to leave the EU on March 29 and there is a 21-month transition period. Political instability is another factor with the Opposition tabling a vote of no-confidence in the government that could trigger an early election. A change of government, and move to the political left, is almost certain. 
So, expect continued uncertainty and volatily in UK stocks this year. The odds favour further falls in the FTSE even though improving valuations could tempt fund managers.
I have learned over the years not to wait until good news becomes obvious before buying. By then, it’s usually too late. Contrarians buy when others will not and tolerate short-term losses, knowing bigger gains are ahead. Picking the precise market bottom is near impossible.
The best way to play an eventual recovery in UK equities is through an Exchange Traded Fund (ETF) over the UK FTSE 100. The ASX has ETFs over European ETFs but no dedicated UK product. Australian investors need to look overseas.
The iShares Core FTSE 100 ETF is a good choice. Quoted on the London Stock Exchange (LSX Code: ISF), the ETF provides exposure to the 100 largest listed UK companies. Like other ETFs, ISF is bought or sold on the exchange like a share and is low cost. 
The British pound is the ETF’s base currency so Australian investors need a view on our dollar versus the pound, in addition to a view on UK equities. The British pound firmed after the latest Brexit vote and could be more volatile than usual over the next few months. 
Some investors obsess about picking hot stocks. Often, a better approach is picking countries to invest in and seeking market rather than company exposure. 
One of my better ideas for The Bull early this decade was buying United States equities. In broking parlance, I went “overweight” US equities after the 2009-08 Global Financial Crisis, believing they were undervalued and stuck with the idea for much of this decade.
I nominated the iShares S&P 500 ETF (IVV) as a cheap way to gain exposure to US companies.  The ASX-quoted ETF returned 13 per cent annually over 10 years to December 2018.
Thematic ideas based on countries or market themes can make a big difference to portfolio returns. Such ETFs can be used passively; for example, holding IVV in the portfolio core for US equities exposure. Or tactically to take advantage of “special situations” when value emerges.
Having trimmed my exposure to overvalued US equities in 2018, I have become bullish on UK equities. Make no mistake: the UK looks like a basket case as debate rages over the country’s exit from the European Union (Brexit) and whether the separation will be “hard’ or ‘soft”.
The crushing rejection this week of UK Prime Minister Theresa May’s Brexit plan triggered political upheaval and suggested the EU separation will be disorderly. Some commentators have described Brexit as the deepest political crisis in the UK in more than half a century.
Markets hate uncertainty and Brexit provides tonnes of it. The FTSE 100 index, the key barometer of UK stocks, is down 11.25 per cent over one year. The index has shed almost 1,000 points since Brexit was first announced and is back at mid-2016 levels. 
Value is improving. The UK market is trading on about 12 times forward earnings compared to 14 times for European stocks (ex-UK) and 17 times for US stocks, on some broker estimates. The Australian market is on about 15 times earnings or right on its historical average. 
Simple index comparisons can deceive because they are affected by index composition, currencies and other factors. Always look beneath the “bonnet” to understand companies in the index and how their valuations compare to peers in other markets. 
Consider Lloyds Banking Group plc. The UK giant trades on a trailing PE of 9.7 times at the current price. In contrast, ANZ Banking Group in Australia trades on 12 times and US bank Wells Fargo is on 11.2 times. Lloyds and other large UK banks look interesting. 
Several UK stocks are trading at discounts to their comparable global peers. A discount is warranted given Brexit uncertainty. But the gap looks excessive in UK banks and other sectors.
Fund flows are another signal. Billions of pounds poured out of UK equity funds in 2018 as fund managers trimmed their exposure because of Brexit uncertainty. Surveys of manager intentions suggested few contrarians were increasing UK equity exposure last year. 
Everywhere one looks, sentiment towards UK equities is being affected by a daily barrage of Brexit bad news. There’s even talk that the Brexit decision could be reversed, although it is hard to see that work. With so much uncertainty, there is a buyer strike in UK equities. 
Granted, finding a catalyst to re-rate UK stocks is hard. The UK is due to leave the EU on March 29 and there is a 21-month transition period. Political instability is another factor with the Opposition tabling a vote of no-confidence in the government that could trigger an early election. A change of government, and move to the political left, is almost certain. 
So, expect continued uncertainty and volatily in UK stocks this year. The odds favour further falls in the FTSE even though improving valuations could tempt fund managers.
I have learned over the years not to wait until good news becomes obvious before buying. By then, it’s usually too late. Contrarians buy when others will not and tolerate short-term losses, knowing bigger gains are ahead. Picking the precise market bottom is near impossible.
The best way to play an eventual recovery in UK equities is through an Exchange Traded Fund (ETF) over the UK FTSE 100. The ASX has ETFs over European ETFs but no dedicated UK product. Australian investors need to look overseas.
The iShares Core FTSE 100 ETF is a good choice. Quoted on the London Stock Exchange (LSX Code: ISF), the ETF provides exposure to the 100 largest listed UK companies. Like other ETFs, ISF is bought or sold on the exchange like a share and is low cost. 
The British pound is the ETF’s base currency so Australian investors need a view on our dollar versus the pound, in addition to a view on UK equities. The British pound firmed after the latest Brexit vote and could be more volatile than usual over the next few months. 
Chart 1: iShares FTSE 100 index under pressureSource: Yahoo Finance

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• Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article consider its appropriateness and accuracy, regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at January 16. 2019.