I reckon those looking to boost the value of their Self-Invested Personal Pensions (SIPPs) should take a closer look at British shares. I think there’s plenty of evidence around to suggest that, in general, they currently offer excellent value for money.
One measure that’s sometimes used to assess the relative valuations of stock markets is the (Warren) Buffett Indicator. Usually expressed as a percentage, it compares the total market-cap of a stock market with a country’s Gross Domestic Product (GDP). It’s a bit like a country-wide price-to-earnings (P/E) ratio.
As an alternative, some add the total value of assets held by a nation’s central bank to its GDP. This reflects that fact that when they buy equities, it inflates the value of the stock market but doesn’t increase economic activity.
Using this modified measure, the UK stock market is currently (25 April) at 79.8%. This is well below its 20-year high of 129.4%. By contrast, the United States has a value of 150.1%. Its two-decade average is 100.4%.
What else?
Further evidence of the attractiveness of UK equities can be found from looking at the results of listed companies. According to the Macro Micro website, based on earnings over the past 12 months, the P/E ratio for the UK stock market is currently 12.7. This compares favourably to Japan (14.5), Germany (17.7) and the United States (24.4).
And with some economists now expecting four interest rate cuts during the remainder of 2025, it might be a good time to buy FTSE 100 stocks.
Something to consider
One in particular that could benefit from lower borrowing costs is Persimmon (LSE:PSN). Since the pandemic, the housing market’s been in the doldrums. It therefore isn’t surprising that the housebuilder’s shares have fallen over 40% since April 2020.
But things could be on the turn. In 2024, the company built 10,664 properties, a 7% increase on 2023. For 2025, it’s forecasting 11,000-11,500. Okay, it’s a lot less than the 14,868 it sold in 2022, but recoveries in the housing market are rarely quick.
Looking further ahead, the government’s focus on reforming the planning process should help the business grow. The company also pays a healthy dividend. Based on the past 12 months, the stock’s presently yielding 4.8%. This puts it in the top 20% on the FTSE 100. Of course, payouts cannot be guaranteed.
What do the brokers think?
However, analysts are expecting earnings and dividends to increase over the next three years. This probably explains why, of the 18 covering the stock, 13 are advising their clients to Buy, four are Neutral and one is recommending shareholders to Sell. The range of 12-month price targets is 1,260p-2,300p, with an average 1,541p.
If the average could be achieved, this would be a 23% premium to today’s price.
But I suspect the broker with the lowest target is concerned that margins are now lower than before pandemic. Also, they might be worried that some of the recent increase in mortgage approvals could be a temporary blip, as first-time buyers rush to avoid the increase in stamp duty, which took effect on 1 April.
Yet Persimmon looks undervalued to me. For this reason, investors could consider adding the stock to their SIPPs.
