“Be fearful when others are greedy, and greedy when others are fearful.” Applying Warren Buffett’s investment adage to the UK, most investors have been firmly lodged in the “fearful” camp for a long time.

The UK market has suffered pariah status for years now, chalking up big outflows since 2016. But 2020 was a particularly brutal year for a deeply cyclical market that was heavily weighted to services and the sectors hardest hit by Covid-19, including airlines, media, oil and aerospace. Nonetheless, the “do not touch with a barge pole” status of the UK looks increasingly hard to justify, for a number of reasons.

There is the obvious attraction of price. The UK is cheaper relative to global shares than it has been for at least 25 years. Since 2016 it has gone from being slightly more expensive versus the MSCI World index to trading at a significant “Brexit discount”. With some of this uncertainty now out of the way, investors can focus on the UK’s advantages: political stability (no election for more than three years), an independent and flexible central bank and relatively manageable government debt.

Line chart of Rebased at 100 showing MSCI World vs FTSE 250

The investment thesis of 2020 was one of lockdowns tilting the economic playing field in favour of technology-enabled companies. This accelerated a trend that had been in place for several years: the outperformance of “growth” stocks (typically associated with digital business models) over “value” stocks (typically associated with “old economy” companies).

If the deployment of vaccines proves successful, the market backdrop could very quickly change in favour of those companies benefiting from a reopening of the economy, and, in general, support more cyclically sensitive stocks, which tend to be well-represented in value indices. As a market exposed to these value sectors, the UK stands to be one of the biggest beneficiaries of vaccines and the subsequent (and much anticipated) style rotation from growth to value stocks.

However, for value to outperform growth, economic activity will need to come back with a bang. This could happen in theory, but it is worth remembering that value sectors, such as banks and the oil and gas industry, are cheap for a reason given the long-term structural challenges they face.

A balanced approach between the two styles will be the prudent approach. We may be on the return to “normal”, but since nobody really knows what normal will look like, investors will be well-placed to rethink their view of defensive holdings.

“During the pandemic, classic defensives like alcohol and cigarettes, stalwarts of the FTSE 100, have not delivered. However, some of the ‘new utilities’ like cloud-based telephony systems have proved their resilience,” argues Alexandra Jackson, manager of the Rathbone UK Opportunities Fund.

If you want to buy the new “best of British”, where are you likely to find these winners? While the UK is not known for its high-growth, high-return tech darlings, it does shine when it comes to the nuts and bolts behind the world’s most prominent tech companies.

Most retail investors will probably never have heard of these UK-listed companies. They are not big brand names, but they play a big part in enabling their customers’ success.

Last week we heard that Bristol-based chipmaker, Graphcore — a company hoping to power a new era of artificial intelligence — had secured $222m in fresh funding in an investment round that values it at $2.8bn, a good example of the untapped potential of the so-called “supporting actors” in the big tech screenplay.

As an investment theme, digitisation will continue to run, given the changes wrought by the pandemic. Companies that scrambled to service customers or help employees work safely from home have pushed IT requirements up the priority line.

Ms Jackson points to businesses such as Gamma Comms, Softcat and — a recent IPO — Bytes Technology, which help medium-sized businesses with their software and hardware needs. Kainos and FDM provide consultants and contractors to corporations and the government to help them with their IT challenges. Draper Esprit is a listed venture capital company offering investors exposure to some of the most exciting private technology companies before they go public — companies such as UI Path, Trustpilot, Revolut and Cazoo.

The property sector typically benefits when interest rates fall as funding becomes cheaper, but Covid-19 drove a further wedge between different parts of the property market. Office and retail have been hard hit, not least the giant real estate investment trust (Reits) that have supported income funds for many years. Logistics and warehousing are now taking up the baton.

Other sectors dubbed tomorrow’s “Best of British” by UK fund managers include sustainability, IT, engineering, video games, speciality finance and logistics.

Finally, don’t discard Britain’s Aim market. There are the familiar names such as Asos, a clear beneficiary of the move to online shopping, and less well known companies such as Frontier Developments, a video games developer, and Bushveld Minerals, a producer of vanadium — a metal with characteristics that position it strongly in the steel, alloys and chemicals sectors and (playing to the sustainability theme) a key component in flow batteries. Jet2.com, another Aim listing, is held by Leigh Himsworth, manager of the Fidelity UK Opportunities Fund, on the grounds that once the boomer generation have had their jabs, they will be back on a plane to Spain.

Many of the growth companies listed on Aim don’t pay a dividend, which might be a bitter pill to swallow for income-hungry UK investors. However, dividend cuts last year demonstrated the benefits of a total return approach. If you invest for the long term, why hold BP or Shell if the yield is in the line of fire and the industry is in structural decline?

Likewise, a position in Lloyds Bank would have chipped away at your capital over the past few years and you would have needed a very handsome yield to plug the gap. Move one tier down and you find asset managers and wealth managers like Liontrust, Mattioli Woods and Brooks Macdonald, which are well priced, offer reasonable yields and should perform well with stimulus and a recovery.

Even the fearful will concede that the best of British do exist. It’s just that they are in some less familiar places.

Maike Currie is an investment director at Fidelity International and former financial journalist. The views expressed are personal. Email:  Twitter:  Instagram: maikecurrie