Professional analysts have more time, more data, and better access to companies than most private investors. As such, the wisdom of the City crowd is worth paying attention to; because, at the end of the day, you’re either going with the pros or going against them when you invest.
Right now, Tesco (LSE: TSCO), Admiral Group (LSE: ADM) and Intu Properties (LSE: INTU) are among the most unfavoured stocks of the professional analysts.
Intu Properties
Intu Properties, formerly more descriptively named Capital Shopping Centres, owns many of the UK’s best-known megamalls, including the Trafford Centre in Manchester and Metrocentre in Gateshead.
Intu’s shares have climbed 20% over the last six months, and the company trades on a forward P/E of 25 at a current share price of 330p.
As the shares and valuation have risen, analysts have increasingly moved to a sell rating: four analysts had the company marked as a sell six months ago; today, there are eight with not a single analyst rating the shares a buy. This contrasts with a bullish consensus on Intu’s FTSE 100 rivals in the real estate sector: Land Securities, British Land and Hammerson.
Admiral Group
Car insurer Admiral is currently the most out-of-favour FTSE 100 insurance firm with the City experts. The company, which also owns comparison website confused.com, has seen its shares dive more than 20% since early July. At a current price of 1,230p the P/E is a modest 12, but the future doesn’t look rosy.
Falling premiums and, in the words of the company last month, no “firm evidence of an inflection point and a return to premium growth” have seen analysts take their red pens to earnings forecasts for the next two years.
Analysts at Berenberg, who had Admiral as a sell long before the recent fall in the shares, sum up the bear position on the company: “We expect recent declines in pricing to squeeze underwriting margins as claims costs continue to grow, while regulatory change presents a threat to some revenue streams”.
Tesco
The supermarket sector as a whole has been unloved by many analysts for many months. Tesco wasn’t quite as out of favour as smaller rival Morrisons, but sentiment towards the UK’s number one has deteriorated under the recent torrent of bad news: profit warnings, a dividend cut and the discovery of accounting irregularities.
Tesco has been downgraded by Deutsche Bank and Santander within the last month, and put under review by Cantor Fitzgerald. Uber-bears, such as Espirito Santo Execution Noble and Societe Generale have reiterated their sell recommendations.
The analysts at SocGen have come up with a share price of 184p based on a discounted cash flow model, but add: “In our worst-case scenario … EPS would fall to 12.9p … implying a valuation per share of 150p, which in our view would be the threshold for viewing Tesco as a value stock”.
