The London stock market is shrinking under an onslaught of investor indifference, corporate takeovers and companies buying back their shares. While that’s bad news for the country, there is money to be made by investors who are willing to go against the tide. That’s the view of fund managers at Temple Bar, a £739m investment trust and Questor tip seeking to generate income and growth from buying good UK stocks when they are cheap. The past four years have been difficult for funds like Temple Bar which invests largely in big London-listed companies. An exodus of investors into US and global funds helped drive UK stock valuations to 40pc below overseas shares. This makes the task of Ian Lance and Nick Purves at RWC Partners easier, providing bargains in finance, consumer spending, communication and mining stocks. The sting in the tail is what they call “valuation agnostic selling” by investors dumping good and bad UK companies alike in pursuit of more international portfolios. “People are doing absolutely the wrong thing,” says Lance, who explains a low valuation is the foundation to good investment returns. In his view, that makes the UK more attractive than the US, despite the gulf in...