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, ultimately, you’re either going with the pros or going against them when you invest.
Right now, Barclays (LSE: BARC) (NYSE: BCS.US), Prudential (LSE: PRU) (NYSE: PUK.US) and Ashtead (LSE: AHT) are among the darlings of the professional analysts.
Ashtead
Ashtead may be ranked at number 80 in the FTSE 100, but it’s top of the pops with analysts. The UK and US rental group, which supplies a comprehensive range of construction and industrial equipment, has been given a unanimous thumbs up by the City.
Ashtead reported what analysts at Panmure Gordon called “another sparkling update” for the third quarter earlier this month; and the company said it now anticipates full-year profit for it’s financial year ending 30 April to be ahead of previous expectations.
The shares are trading on 20 times forecast earnings, but the City experts are predicting strong growth to come: analysts at Jefferies, for example, believe Ashtead has the ability to double its share of a fragmented US market from 6% to 12% in four to six years — entirely “self-financed by robust cash flows”.
Prudential
Prudential may be the super-heavyweight insurer of the FTSE 100, but analysts at Killik & Co, in common with many City experts, reckon the company is “the best growth idea in UK insurance”. Barclays’ analysts go even further, describing Prudential as, “our top pick in European Insurance”.
The main reasons behind the bullishness are Prudential’s balance sheet strength, and the business positioning in its key geographies, particularly the US and Asia, which helped drive a 17% rise in annual operating profit, announced last week.
Most City experts reckon Prudential is good value for its premium 14 times current-year forecast earnings, including Goldman Sachs, which maintains the company as a “conviction buy”.
Barclays
Barclays’ annual results hardly set the world alight on 11 February, and the shares were down 8% by the end of the week. Costly legacy issues of PPI and other mis-selling, LIBOR and other benchmark-fixing, bonuses, and a poor performance from the investment bank, where a shake-up is now expected, all continue to weigh heavily on market sentiment.
As a result, the shares trade on just eight times current year forecast earnings, and at a 17% discount to tangible net asset value. The market’s pessimism is in direct opposition to almost universal City optimism. The balance of analysts rating the shares a buy is higher than at any time in the past 12 months.
On a sum-of-the-parts valuation, analysts at Espirito Santo reckon Barclays is on offer with the investment bank thrown in for free: “We estimate no value is being attributed to the investment bank. The investment bank contributes c.120p to our fair value of 356p, and excluding this gives you the current share price”.
