Barclays has identified a selection of global stocks for investors to consider purchasing before the year’s end, referring to these as "conviction stock ideas with catalysts." The bank’s recommendations include six overweight-rated stocks from the U.K., each with an average upside potential of 25%. In an equity research note dated October 11, Barclays’ analysts justified their continued overweight rating for U.K. stocks by highlighting ongoing "hopes for domestic recovery," though they acknowledged that "sentiment is cautious going into October budget." They further observed that U.K. stocks are generally under-owned and appear undervalued. The analysts noted that the FTSE 100 index, while lacking a strong tech presence, is currently benefiting from a rally that favors indices with a value/defensive tilt. Additionally, they suggested that U.K. domestic stocks could gain from "reduced uncertainty and better growth prospects," possibly resulting in a lower risk premium in the medium term.
Two of Barclays’ highlighted conviction stock ideas demonstrate over 35% upside potential:
SSP Group
SSP Group, a travel food and beverage operator, was noted for having the most considerable upside potential, with an expected 46.4% rise to £2.40 ($3.12) per share within the next year. Shares of SSP are traded on the London Stock Exchange and as an American Depository Receipt (ADR) in the U.S. with the ticker SSPPF-US. Year-to-date, the shares have declined approximately 30.4%. Barclays’ optimistic outlook stems from SSP’s "strong returns from investment in the last two years, including from integrating past acquisitions." The analysts believe ongoing measures are being taken to boost margin growth, particularly addressing challenges in Europe due to renewals, loss-making German motorways, industrial rail action, and other intrinsic factors. A new Europe CEO has been appointed to drive focused strategies.
ConvaTec
ConvaTec, a medical products and technology company, also shows strong positioning due to its balanced growth profile across business segments, according to Barclays. The analysts perceive potential for surpassing the fiscal year guidance, especially considering the delayed implementation of the LCD and the buffer assumed in the guidance. Furthermore, they expressed confidence in management’s ability to achieve 5-7% growth, even in unfavorable scenarios, and noted ongoing momentum across businesses driven by robust launch activities. ConvaTec shares are listed on the London Stock Exchange and trade as an ADR in the U.S. under the CNVVF-US ticker. Year-to-date, shares have decreased by nearly 6%. Barclays has set a target price of £3.20 for the stock, suggesting around 39.1% upside potential.
This report includes contributions from Michael Bloom of CNBC.
