The FTSE 100 (UKX) hit a low in March 2009, at about 3530. Two years later, it stands at about 5957; an increase of about 70%. That's a huge rebound, and investors may be wondering where the market is headed next. What areas should we look at to maximise our returns: cyclicals, growth stocks, defensives, bonds, something else maybe?
In his article Focus: Searching for Growth, Chris White argued: "The greatest value across all asset classes at the present time lies in large-cap, blue-chip, high-yielding equities".
Furthermore:
Equity income funds have come under fire for all being invested in the same stocks in this area of the market ... with UK FTSE 100 companies receiving 70 per cent of their earnings from outside the UK, our globalised stockmarket is not just aligned to UK GDP, but more to a blend of international economies, most of which can be expected to grow faster than the UK in 2011. Investors should start to look to sectors which benefit from rising inflation, interest rates and bond yields such as insurance, oil, tobacco, utilities and food retail.
The Motley Fool quotes in an article the following recent statement by Neil Woodford:
I am invested in some of the best quality companies in the UK stock market on ludicrously cheap valuations. In my opinion, this is the best investment opportunity since the tech bubble in 2000.
As an experiment, I sought confirming/disconfirming evidence for the bullish case on defensive shares. I chose 7 large-cap defensive companies at random: Astrazeneca (LON:AZN), British American Tobacco (LON:BATS), Centrica (LON:CNA), Diageo (LON:DGE), Telecom Plus (LON:TEP), Tesco (LON:TSCO), Unilever (LON:ULVR). I compiled the following table:
| PER | PILE | Y10 | Y0 | |
| AZN | 6.8 | 10 | 1.4 | 5.7 |
| BATS | 13.6 | 70 | 5.6 | 3.5 |
| CNA | 12.6 | 50 | 1.2 | 4.5 |
| DGE | 15.0 | … |
