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[vc_row][vc_column width="1/1"][vc_column_text]It’s hard to believe that 12 months have passed since the UK’s vote to leave the EU. Sterling remains weak against the Euro, Downing Street’s future hangs in the balance and the country is divided right down the middle. But the UK’s UK 100 is still offering a wealth of trading opportunities. Talk about resilience. This report identifies our ten favourite UK 100 stocks that could offer you ample profits over the coming three months.
The second quarter of 2017 has delivered yet more surprises for investors: not only the announcement of the UK snap general election but also the eventual Hung Parliament – the 3rd Western political surprise in under 12 months. Surely there’s nothing left that could top that? Au contraire. Below we preview the key events of Q3.
Official Brexit negotiations have finally begun, only two weeks after the UK election result. What was supposed to be a procession for the Conservative party ended in an embarrassing Hung Parliament, giving greater voice to the opposition and those who seek a ‘soft’ Brexit. These include members of Prime Minister Theresa May’s own cabinet. Can the government’s negotiating team, led by David Davis, get the talks off to a strong start?
While the US Federal Reserve has been gradually raising interest rates since December 2015, Europe has taken longer to warm to emerging hawkish rhetoric. However, Q2 saw some seismic changes from the Fed’s European peers. After months of speculation, the ECB began discussing tapering QE, with Italian lender Unicredit expecting process to begin in September, while in the face of rising inflation, the most policymakers at Bank of England voted for a rate rise since 2011. In fact, analysts at Nomura even see the BoE raising interest rates back to 0.5% from record lows of 0.25% as soon as August. Might Governor Carney finally pull the trigger?
After a testing second quarter, the Trump administration is now no closer to key reforms than it was three months before. Its proposed Healthcare bill continues to be delayed from being presented to Congress by lawmakers, which has even prompted the IMF to lower their growth forecasts for the US as the proposed fiscal stimulus is still yet to appear. Can the administration overcome the odds and pull a fiscal rabbit out of its political hat?
On top of these key events, OPEC will have to react to falling Crude Oil prices when they meet in July and Angela Merkel looks to hold on in the German Presidential election. Who says excitement was over for another year?
Over the page we analyse the best and worst UK 100 performers of the year so far. Perhaps some of the names overleaf might surprise you. Could Q3 see a turnaround for the UK’s biggest utilities provider?[/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column width="1/1"][vc_column_text]We have noted in previous top stock picks reports this year that we’ve seen not just ‘once in every four-year events’ take place, but multiple once in a generation events, a trend which continued into the second quarter. Notable market-moving events have come in abundance in the second quarter, greatly influencing the UK 100 . Below, we look at the best and worst performers through the first half of the year. Who are the heroes and villains?
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[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width="1/1"][vc_column_text]The most striking performer in the tables above might be BT, the UK 100 stalwart that has fallen to 4-year lows but perhaps the most surprising performance comes from UK Index newcomer ConvaTec. The medical products supplier, having only been floated on the London Stock Exchange in October, has seen its meteoric rise not just rewarded with a listing on the UK’s blue-chip index, but has also outperformed its large-cap peers during 2017.
Fresnillo (9th; +27.9%) was the top performer during Q1 (1st;+29.9%), however has failed to build upon those gains as Gold remains stuck between safe-haven seeking and more hawkish central bank rhetoric. On the other hand, International Consolidated Airlines (2nd; +37.6%), the fourth worst performer of 2016, has built on gains made during the first quarter (4th; +21.3%) to cement its position in the UK Index leaders table, while Persimmon (10th; +27.9%) also continues to trade strongly, holding its top 10 position while peer Taylor Wimpey drops out.
The rest of the top performers is comprised of Defensive stocks, many of which have a European focus (Coca-Cola and Unilever) benefitting from Brexit uncertainty and the UK general election lifting the Euro against Sterling.
At the bottom of the index, BT (100th; -21.4%) has superseded Pearson (95th; -13.7%) as the worst performer, continuing to be dogged after its January profits warning due to accounting malpractices at its Italian division. Pearson shares, on the other hand, have welcomed the restructuring of the business, rallying from 2017 lows.
Other names languishing in the bottom 10 at 2017’s halfway point are Next (99th; -20.6%), holding its runner-up position as UK Retail Sales continue to fall, while Tesco, Kingfisher and ITV suffer from poorly-received results.
With Q3 loaded with yet more significant macroeconomic and political events, we’ve compiled an analysis of our 10 favourite stocks that we think you should watch as we enter the second half of the year. Which do you like?[/vc_column_text][/vc_column][/vc_row]
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Bullish: Vertical Research Partners, Buy, Target 780p, +22%, (27 Jun)
Average Target: 677.4p, +6.3% (29 Jun)
Bearish: Barclays, Underweight, Target 460p, -28% (2 Mar)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: Societe Generale, Buy, Target 265p, +28%, (15 May)
Average Target: 222.5p, +7.4% (29 Jun)
Bearish: Goldman Sachs, Sell, Target 180p, -13% (5 May)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: Bernstein, Outperform, Target 5991p, +18%, (23 Jun)
Average Target: 5371p, +6.0% (29 Jun)
Bearish: Berenberg, Hold, Target 4300p, -15% (22 May)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: Bernstein, Buy, Target 250p, +24%, (22 Jun)
Average Target: 207.7, +2.7% (29 Jun)
Bearish: Investec, Sell, Target 170p, -16% (5 May)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: Bernstein, Outperform, Target 460p, +58%, (29 Jun)
Average Target: 362.5p, +25% (29 Jun)
Bearish: Liberum, Hold, Target 285p, -2.0% (1 Jun)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: JP Morgan, Overweight, Target 1200p, +25%, (23 Jun)
Average Target: 1057p, +10% (29 Jun)
Bearish: Credit Suisse, Underperform, Target 927p, -3.4% (28 Jun)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: UBS, Buy, Target 4900p, +24%, (23 Mar)
Average Target: 4093p, +3.3% (29 Jun)
Bearish: HSBC, Reduce, Target 3360p, -15% (13 Dec)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: BIBC World Markets, Outperform, Target 9000p, +30%, (23 Jun)
Average Target: 7716p, +11% (29 Jun)
Bearish: RBC Capital Markets, Underperform, Target 5800p, -16% (29 Jun)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: Grupo Santander, Buy, Target 346p, +37%, (25 May)
Average Target: 285.3p, +2.0% (29 Jun)
Bearish: AlphaValue, Sell, Target 181p, -29% (29 Jun)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Bullish: UBS, Buy, Target 350p, +35%, (3 May)
Average Target: 275.8p, +6.5% (29 Jun)
Bearish: JP Morgan, Underweight, Target 200p, -23% (22 Jun)
Pricing and consensus data sourced from Bloomberg on 29 June. Please contact us for a full, up to date rundown.[/vc_column_text][/vc_column][/vc_row]
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Whether you see UK stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.
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The example above shows how buying 1,450 shares in British Land @ £6.90 requires an outlay of around £10,000 plus commission (see left-hand box), while the same exposure via a CFD requires about £500 plus commission (see right-hand box). If a trader invests in British Land, one would assume they believe the share price is likely to move in their favour. After considering the ‘worst case scenario’ and assigning funds to cover it, the trader may conclude there’s little point in exposing the full £10,000 to the BLND shares - some of that capital could be put to good use elsewhere in the markets. (Source: IG, Prices indicative)
If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure. The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up just £500 (note that overnight financing costs will still apply). The remaining £9,500 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!
Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios download our ‘Comprehensive Guide to CFDs’ here.
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AccendoFX Ltd - 1 Alie Street, London, E1 8DE (UK) - AccendoFX Ltd. is registered with the Financial Conduct Authority (FCA) No. 671133 and HMRC No. 12798406. Registered in England and Wales No. 9269365.[/vc_column_text][/vc_column][/vc_row]
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research