UK equities can maintain current valuations, says Panmure Gordon
Companies: CHG, EPWN, GEMD, GNK, HSD, MCB, SHEL, STJ, WIZZ
Each quarter, UK Investment Bank Panmure Gordon & Co publishes its Conviction List, a report that focuses on various themes for the upcoming quarter, and a list of stocks the firm believes offer upside to investors.
Since starting the Conviction List in 2010, it has outperformed the market in 11 of 19 periods and following Panmure's list would have returned 260% against a Small Companies index return of 194%.
Panmure's famous Conviction List returned a modest 0.4% in the last quarter, whilst the benchmark UK Small Companies index returned 4% during that time.
The list rotates in and out various stocks each period.
Q1 Entrants
Chemring (£475m market cap)
Epwin (£144m market cap)
Gem Diamonds (£152m market cap)
McBride (£330m market cap)
Royal Dutch Shell (£88824m market cap
St James's Place (£5465m market cap)
Wizz Air (£1031m market cap)
Q1 Exits
Greene King
Hansard
Merlin
Pantheon Resources
"Our Q1 portfolio reflects our non-consensus outlook for an ongoing sweet spot for UK growth during the first half of 2017. The downside risk from the uncertainty of the EU Referendum result has been countered by stimulus from the Bank of England, looser fiscal stance from the Treasury and a 15% YoY reduction in the Sterling Exchange Rate. Despite recent moves higher, low nominal fixed income spreads continue to provide a valuation underpin for global equities."
Outlook for UK Equities
Panmure says global corporate earnings are experiencing a broad-based recovery, and the firm says it is confident that UK equities can maintain current valuations:
"We expect debt to remain cheap across all geographies, supported by accommodative central banks – including the BoE and Fed. While increasing focus is on geopolitical risks in the Eurozone we believe the more prescient danger for global equities is an escalation in the current war of words on USChina relations. While a trade war is not our central case such an outcome would be deflationary in the US economy as strategic selling of Treasuries and a tactical weakening of the Yuan would suppress US corporate and household activity."
You can access the full report and see Panmure's views on the stocks above here:
