In the introduction to the report, Barclays analysts Ian Scott and colleagues summarize their bullish call on the British financial sector. “Specifically, we highlight the Banks where earnings estimates are rising for the first time in more than a year, and the improvements already made in domestic UK economic fundamentals suggest that this has further to run…We remain overweight in UK Banks and underweight the Staples.”
UK banks earnings estimates up
Ensemble Capital: Contrarian Long Thesis For Title Insurance
The fifth Contrarian Investor Virtual Conference is over, and investors are mulling over the stock picks that were presented. Sean Stannard-Stockton of Ensemble Capital Management was among the presenters. He offered his long thesis for First American Financial, a title insurance company. Q3 2020 hedge fund letters, conferences and more
The Barclays analysts point out that IBES consensus estimates for UK banks are rising again, with bottom-up estimates for 2014 up by 1.8% from July 31st. They also reiterate their projection of EPS growth of 8% in 2014, increasing to 10% next year. Both of these estimates are ahead of current consensus bottom-up forecasts of 2% and 8%, respectively. The report also maintains Barclays’ year-end target of 7250 for the FTSE 100.
Scott et al. also note that UK banks improved earnings prospects are driven both by the recent decline in the Sterling (which they expect to continue) and improving economic fundamentals.
Scottish stocks look to make up lost ground
The report also suggests that at least a handful of Scottish-based companies are likely to play catch up over the next week or two following the failure of the separation referendum. Of note, there’s not that much ground to make up, given relative performance of companies with headquarters in Scotland has not really been that negative. In fact, Scottish-based companies have only underperformed the broad UK market by around 4% since July 31st.
According to the Barclays analysts: “…one could expect to see a bounce back but we think it is likely to be modest”
They go on to say stocks to benefit the most will be those with underlying fundamental support, where the uncertainty over the referendum has held back what could have been a much better performance. Scott et al highlight Lloyds as one such company in the banking sector.