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, Barclays (LSE: BARC) (NYSE: BCS.US), ITV (LSE: ITV) and Sports Direct (LSE: SPD) are among the favoured stocks of professional analysts.
Barclays
The market has pushed Barclays’ shares down 20% from a year ago, but the bank has become increasingly popular with the City experts. More than 70% of analysts now rate Barclays a buy, and not one has it down as a sell.
At a current price of 222p, Barclays trades at just 0.8 times tangible net asset value (tNAV) — much cheaper than the company’s big banking rivals, who all trade at or above tNAV.
Analysts at Investec have summed up the buy rationale of the City experts: “In our view, trading on just 0.7x 2016e tNAV, Barclays valuation remains highly attractive for investors willing to look through weak near-term profitability constrained by its major restructuring programme, challenging FICC [fixed income, currencies and commodities] trading conditions and a raft of regulatory uncertainties”.
ITV
ITV’s shares have outperformed both Barclays’ and the wider FTSE 100 over the last year, rising 7%. Nevertheless, most of the City pros continue to see compelling value in the X-Factor and Downton Abbey broadcaster at a current price of 197p.
Analysts also see potential catalysts for further upside; specifically, capacity for capital returns to shareholders, regulatory change on retransmission fees and takeover potential. Credit Suisse reckons any potential bidder for ITV would have to pay in excess of 346p a share.
Credit Suisse suggests: “The recent pull-back, on global growth concerns, provides an attractive entry point for investors looking for exposure to one of the rare, growing, TV content assets in Europe”.
Sports Direct
Sports Direct founder Mike Ashley has been in the news of late over his football club machinations (an attempt to oust the chief executive of Rangers), while Sports Direct itself has also been prominent of late for wheeling and dealing (derivative bets on Tesco and Debenhams shares), rather than for the operating performance of the business.
Nevertheless, Ashley has the City onside with 8 out of 10 analysts rating Sports Direct a buy, and no sell recommendations. Target prices are in the 800p-850p area, compared with a current price of 575p.
A recent note from Citigroup (one of Sports Direct’s house brokers) has been summarised as follows: “The ongoing strength of the group’s still immature online operation, further growth in the store-based like-for-like sales and the progressive retail earnings margin outlook, underpin the potential for 20% annual underlying earnings growth between 2014-17”.
