FTSE: Analysts most bullish on UK stocks since before Brexit as London ‘potentially undervalued’
Brokers are the most bullish on FTSE stocks since at least 2015, according to new analysis, as the market’s recent underperformance has made shares cheaper.
Investment platform AJ Bell found that as of earlier this month, 59 per cent of all analyst ratings were “buy” and just eight per cent “sell” for FTSE 100 companies – the highest and lowest figures respectively in at least eight years.
The FTSE 350 followed the same pattern, with 62 per cent positive recommendations and seven per cent negative.
Analysts’ bullishness has steadily risen in each year since 2020 as the capital’s valuations lag behind international peers and become cheaper on a relative basis.
The FTSE 100 has fallen nearly two per cent in the last 12 months, while the US’ S&P 500 and Japan’s Nikkei have rallied 22 per cent and 31 per cent respectively.
Russ Mould, investment director at AJ Bell said that some investors may “ponder whether the analysts are on to something as they champion the unloved, and thus potentially undervalued, UK stock market”.
These stocks are also cheaper on an absolute basis, as earnings and dividends continue to grow.
The City has seen a slowdown in capital markets and dealmaking activity over the last year. Several big companies have also snubbed the London Stock Exchange for listings in New York, which offers better valuations and liquidity.
AJ Bell also found that analysts’ top stocks failed to beat the FTSE 100 in seven of the last nine years.
Mould said: “This suggests there may be some truth in the idea that the huge flows of money into passive instruments such as exchange-traded funds mean there are opportunities for skilled stock-pickers.”
However, the firm also found that FTSE 100 stocks with the highest percentage of “sell” ratings generally performed better than the most popular ones and the index as a whole last year.