Forgotten industries have substantial upside potential

A near 30% rally from the lows of early March to the peak on 1st June has been characterised by a fierce debate between investors over cyclicals versus defensives. We feel this misses the point of the rally entirely.

The recovery in valuations has been confined largely to two big sectors: financials and mining. Both reflect a recovery in risk appetite by investors and that financial disaster has been averted through massive state intervention and a re-opening of M&A activity, which when combined, are allowing the banks to repair their balance sheets. While this has been great news for the market, it only gets most share prices back to where they were at the start of the year. Most ‘cyclical’ sectors have barely moved. Industries such as media, IT and consumer discretionary are trading on valuat...