Ocado, Just Eat, Right­move and oth­ers se­lected for new re­li­able growth’ list

Growth scarcity sees eight UK firms in Beren­berg’s new Nifty Fifty

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An in­creas­ing scarcity of com­pa­nies ca­pa­ble of de­liv­er­ing sus­tain­able, qual­ity growth has led an­a­lysts at in­vest­ment bank Beren­berg to re­visit the Nifty Fifty con­cept pop­u­larised in the 1960s and 1970s.

There are eight Lon­don-listed stocks that have made the cut to fea­ture on the bank’s Euro­pean

con­tem­po­rary list: Ocado (OCDO), Har­g­reaves Lans­down (HL.), Just Eat (JE.), NMC Health (NMC), Right­move (RMV), Dechra Phar­ma­ceu­ti­cals

(DPH), St James’s Place (STJ) and Sage (SGE).

The Nifty Fifty was orig­i­nally a se­lect group of US stocks. They qual­i­fied on the ba­sis that they were able to pro­duce con­sis­tent growth even dur­ing times of mar­ket distress and un­cer­tainty, earn­ing them a rep­u­ta­tion as ‘one de­ci­sion’ stocks, mean­ing you buy them and never sell.

Con­cerns have started to build for in­vestors over re­cent months thanks to ris­ing in­ter­est rates on both sides of the pond, eco­nomic wor­ries in the

REV­ENUE GROWTH OF MORE THAN 4% IS A MORE SIG­NIF­I­CANT DRIVER OF VAL­U­A­TION THAN EPS GROWTH WITHIN EUROPE

Eu­ro­zone and emerg­ing mar­kets, Brexit con­fu­sion and share price val­u­a­tions.

This has led to claims of po­lar­i­sa­tion of stock per­for­mance, with a rel­a­tively small num­ber of strong per­form­ing share prices driv­ing the lion’s share of stock mar­ket re­turns, par­tic­u­larly in the US. The S&P 500’s five largest com­pa­nies – Ap­ple, Al­pha­bet, Ama­zon, Face­book and Mi­crosoft – ac­count for around 16% of the en­tire in­dex.

Beren­berg’s lat­est anal­y­sis sug­gests that rev­enue growth is a more re­li­able guide to fu­ture share price re­turns than earn­ings. This is largely be­cause of the po­ten­tial for earn­ings to be ma­nip­u­lated, such as un­sus­tain­ably cut­ting op­er­a­tional costs to bol­ster earn­ings per share fig­ures.

‘In par­tic­u­lar, com­pa­nies re-rate when they de­liver over 4% rev­enue growth, the min­i­mum to cover in­fla­tion in in­put costs and in prod­uct or ser­vice func­tion­al­ity,’ says Beren­berg.

Me­dian PE vs EPS growth: Stoxx 600

Me­dian PE vs sales growth: Stoxx 600

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