UK stock picks to buy, avoid with fourth quarter catalysts: Barclays


  • The FTSE 100 was one of the worst-performing major indexes in Europe in September. However, UK investment bank, Barclays, in a research note, said stocks in the UK region were cheap and under owned. 
  • The UK market is “foreign exchange sensitive” and with the GBP likely to be choppier due to Brexit uncertainty, Barclays predicts the FTSE 100 will improve, which could create opportunities for investors.
  • Barclays outlines seven UK stock picks with catalysts in the fourth quarter and two stocks to sell.
  • “Our seven OW-rated stocks have an average upside to our PT of 26%; whilst our two UW-rated stocks have an average downside to our PT of -27%,” said Barclays’ equity analyst, Richard Taylor, in the note.
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The FTSE 100, the UK stock index that tracks the biggest 100 companies on the London Stock Exchange, was one of the worst-performing major indexes in Europe in September.

UK assets were hit hard due to a surge in COVID-19 cases in Britain, along with tighter restrictions on movement and renewed concerns over Brexit. 

FTSE 100 index on October 9

FTSE 100 index on October 9

Business Insider Markets


However Barclays, the British investment bank, still sees opportunities within the UK.

Until last month, the bank had an underweight rating on the UK but this has now switched to medium-weight.

In an October 8 research note, the bank acknowledged that the uncertainty of Brexit combined with “waning” fiscal support could leave the UK with slower recovery. However, with the UK being a foreign exchange sensitive market, the pound is likely to be choppier due to uncertainty around Brexit, which could help with the FTSE 100’s poor performance and create opportunities for investors.

“The [UK] region is under owned, cheap and the rebound in commodity prices helps earnings, but the index is highly defensive, which is unappealing to us at this stage of the cycle,” said Barclays’ equity analyst, Richard Taylor, in the note. “Within the UK, we prefer exporters over domestics.”

Many of the heaviest weights in the FTSE are internationally focused, such as miners Anglo American, Glencore and BHP Group, or oil and gas producers such as Shell or BP, and conglomerates such as Unilever and BAE Systems.

Read More: Betting against the FTSE 100 netted traders £418 million in September. These are the top 5 most and least profitable short sells last month

The preference for exporters versus domestics comes from the fact exporters could be supported by a softer pound, whereas domestic focused companies could face bigger headwinds, Taylor said. The pound has lost almost 8% against the euro this year, and nearly 2% against the dollar.

Barclays outlines seven UK stock picks that have fourth quarter catalysts as well two UK stocks to avoid.

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