What a year 2016 has proved to be so far. A series of major events over the course of the year have massively influenced financial markets, making 2016 this decade’s most exciting year for investors. But it’s not over yet.

As regular readers of our research will know, every quarter we highlight the top 10 stocks we believe will outperform the market in the coming quarter, providing opportunities for short term traders and long term investors alike. With a mix of blue chip heavyweight defensive, retail and utility providers, each of our stock picks has potential to provide returns just in time for Christmas. Alongside the usual Q4 Santa Rally, investors have a lot to look forward to.

Moving into the final quarter of the year, a packed events calendar is going to create opportunities aplenty for investors, Q4 2016 is guaranteed to produce a fantastic final fireworks display thanks to these five key events:

Clinton vs. Trump

The US Presidential election. The headline event of Q4 is without a doubt the heavyweight bout between Presidential hopefuls Hillary Clinton and Donald Trump on November 8^th. The former viewed with increasing scepticism from voters worried about trustworthiness, while the latter is unpredictable at best. When our stateside partners head to the polls will they choose to vote in President Clinton and her vast political experience or instead go for President Trump and his decades of business acumen? The status quo of Democratic nominee Clinton is seen as favourable for financial markets, but four years of businessman Trump could still provide the opportunity for investors to win big.

Au Revoir, Auf Wiedersehen

Hard or soft Brexit? It seems that no one can agree on what form the UK’s EU exit could take. With article 50 likely to be triggered in the New Year, the long term effect of the European referendum has yet to materialise. However, the British economy looks to have reversed the pessimistic outlook adopted after the referendum result and has been replaced with cautious optimism and resilience with the UK 100 close to all-time highs. Against a growing background of Euroscepticism across Europe, will the UK’s industry leading companies continue their impressive form?

US Raise Me Up?

The US Federal Reserve and its interest rate rendezvous. Predictions of multiple rate changes this year were quickly revised after Brexit and now it seems likely we’re set for just one, if any, as Federal Reserve Chairwoman Janet Yellen refuses to rush the raising of the US base interest rate. Good news for financials. Continuing discord amongst Fed members has attributed to multiple swings in the strength of the USD, the denomination of the majority of world commodities. Even if the rates do rise in December, one rate rise in 12 months has left markets looking incredibly strong.

OPEC’s Onerous Oversupply

The global oil glut. The news of a preliminary agreement by members of OPEC to cap daily oil production to between 32.5m and 33m bpd has been welcomed by oil investors. In reflection, however, this amounts to a very small proportion of the cartel’s output being reduced (0.7-2%), while non-OPEC producers, most notably Russia (who are producing at post-Soviet record highs), continue to saturate the market. Following on from these baby steps, can the exporters of the black stuff reach a concrete agreement in November to reduce the barrels rolling off the production line and provide a sustained crude oil price rally their economies and the energy sector craves?

Achtung!

Deutsche Bank. On top of the geopolitical and economic events on the horizon, banks remain a key cog in the wheel that turns financial markets, particularly in Europe. After the US Department of Justice announced a fine for DB of $14bn for the mis-selling of mortgage-backed securities, worries have grown over its capacity to pay the fine. The obvious contagion for the rest of the global banking sector is a concern. However, with suggestions of a reduction in the fine from the DoJ and rumours of the German Government already drawing up a DB contingency plan (should the worst case scenario emerge), investors’ minds should be put at ease that a repeat of Lehman Brothers will not be allowed to take place.

Winners and Losers Post-Brexit

The EU referendum has been dominant in providing direction for financial markets in Q3, so much so that we have made the decision to provide an analysis of share price performance since reaching Brexit lows in the table below.

Source: Bloomberg

Among the list of outperformers includes life insurance providers (STJ & AV.), alongside strongly performing mining stocks (AAL & GLEN), all of whom are performing above pre-referendum levels. Housebuilders (BDEV & PSN), also enjoyed an impressive bounce, although are yet to regain their positions on the Thursday before the referendum result.   

An honourable mention outside of the top 10 must go to Fresnillo (FRES), currently enjoying the best performance on the UK 100 when compared to its pre-Brexit level on June 23^rd.

At the very bottom of the list are a host of defensive, cyclical and utilities companies largely unaffected by the vote, and the majority have since seen share price performance prove underwhelming in comparison with the greatest bouncers. All of these companies are trading within 10% of their pre-Brexit levels, however notable exceptions BT Group (BT.A) and Pearson (PSON) are still suffering from long-term downtrends, while easyJet (EZJ) has to cope with  the prospect of a lack of demand for short haul flights as a result of the referendum.

Does this suggest that some of these companies are primed to reward opportunistic investors who spy a bargain?

Christmas Come Early?

With all of this in mind, the following pages detail the 10 stocks that we believe will outperform the market in the coming quarter.

Continuing with the cautious theme from our suggestions for Q3, we have chosen a mix of consistent blue chip performers on the UK 100 . With a choice of defensive utility, energy, retail and mining stocks, with the aim to put you in the position to benefit from any outcome of the key events listed above.

1) Rolls-Royce Holdings (RR.)

Will shares rise towards highs of 850p (+20%) or fall towards lows of 500p (-30%)?

• 2016 rising channel
• Support thanks to100 day moving average around 700p
• Technicals suggest shares are oversold
• Potential for a move from negative to positive consensus

Broker Consensus: 4% Buy, 46% Hold, 50% Sell

Bullish: Day By Day, Buy, Target 1043p, +47% (28 Jul)

Average Target: 634p, -11% (30 Sept)

Bearish: Panmure Gordon & Co Limited, Sell, Target 500p, -30% (6 Sept)

N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Please contact us for a full, up to date rundown.

2) Morrisons (MRW)

Will shares post fresh highs above 220p (+5%) or pull back into the channel floor 140p (-33%)?

• Shares have turned over at 220p to make for shallow rising resistance
• Back to rising support?
• Technicals overbought
• Even most Bullish broker target predicts share price fall!

Broker Consensus: 5% Buy, 42% Hold, 53% Sell

Bullish: Bernstein, Market Perform, Target 210p, -2% (29 Sept)

Average Target: 189p, -12% (30 Sept)

Bearish: HSBC, Reduce, Target 135p, -37% (16 Sept)

N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

3) TUI Group (TUI)

Will shares break out above 1285p (+19%) or pull back towards Brexit lows of 813p (-25%)?

• Post-Brexit uptrend and recently made 7-month highs
• Zero ‘sell’ ratings by brokers; even the lowest broker target suggests 5% upside
• Potential support at 1050p thanks to 200 day moving average

Broker Consensus: 83% Buy, 17% Hold, 0% Sell

Bullish: Kepler Cheuvreux, Outperform, Target 1590p, +47% (27 Sept)

Average Target: 1287p, +19% (29 Sept)

Bearish: Stifel, Buy, Target 1130p, +5% (30 June)

N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

4) Shire (SHP)

Will shares pull back towards the lows of 3400p (-22%) or post fresh all time-highs above 5875p (+17%)?

• 2016 uptrend; potential bullish flag pattern
• Most bearish target price still suggests +4% upside
• Zero ‘sell’ ratings by brokers
• Recently made fresh 2016 highs

Broker Consensus: 96% Buy, 4% Hold, 0% Sell

Bullish: Bryan Garnier & Cie, Buy, Target 6900p, +38% (29 Sept)

Average Target: 6030p, +20% (30 Sept)

Bearish: Credit Suisse, Outperform, Target 5200p, +4% (13 Sept)

 
N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

5) Anglo American (AAL)

Will shares pull back to support at 840p (-13%) or keep on moving up towards the highs of 1200p (+24%)?

• Trading at 2016 highs after a very strong rebound
• 40% upside to two year highs of £14
• China situation not as dire for commodities as previously thought
• Consensus doesn’t need to shift much to turn positive

Broker Consensus: 29% Buy, 29% Hold, 42% Sell

Bullish: Bernstein, Outperform, Target 1250p, +30% (29 Sept)

Average Target: 856.6p, -11% (29 Sept)

Bearish: Societe Generale, Sell, Target 390p, -59% (22 July)

N.B. All pricing and consensus data was sourced from Bloomberg on 29 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

6) Hammerson (HMSO)

Will shares pull back towards Brexit lows of 465p (-21%) or move on up towards the highs of 690p (+19%)?

• Post Brexit uptrend of rising lows
• Share potential to break longer term downtrend thanks to large Brexit bounce
• Discounting one day Brexit low, potential bullish head and shoulders?
• Zero ‘sell’ ratings by brokers

Broker Consensus: 62% Buy, 38% Hold, 0% Sell

Bullish: J.P. Morgan, Overweight, Target 750p, +22% (29 Sept)

Average Target: 612.8p, +4% (29 Sept)

Bearish: Jeffries, Hold, Target 473p, -20% (26 Sept)

N.B. All pricing and consensus data was sourced from Bloomberg on 29 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

7) Dixons Carphone (DC.)

Will shares pull back towards Brexit lows of 275p (-25%) or rally back towards the highs of 500p (+37%)?

• Strong post-Brexit uptrend
• Potential to bounce at intersecting support levels?
• Overwhelming positive consensus

Broker Consensus: 87% Buy, 0% Hold, 13% Sell

Bullish: Numis, Add, Target 52 5p, +44% (11 July)

Average Target: 428p, +17% (29 Sept)

Bearish: Morgan Stanley, Underweight, Target 315p, -14% (18 Sept)

N.B. All pricing and consensus data was sourced from Bloomberg on 29 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

8) Sky (SKY)

Will shares fall to Brexit Lows of 770p (-14%) or continue the breakout towards the highs of 1135p (+26%)?

• Post-Brexit uptrend
• Potential breakout at 900p could overcome 2016 downtrend
• Significant upside to prior highs

Broker Consensus: 63% Buy, 15% Hold, 22% Sell

Bullish: Macquarie, Outperform, Target 1400p, +58% (25 Aug)

Average Target: 1064p, +18% (30 Sept)

Bearish: Liberum, Sell, Target 630p, -21% (26 Sept)

 
N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

9) Mediclinic International (MDC)

Will shares pull back towards lows of 796p (-15%) or reach two year highs at 1220 (+30%)?

• Has maintained post-Brexit breakout
• Potential bounce at 925p intersecting support?
• Some technicals oversold

Broker Consensus: 22% Buy, 56% Hold, 22% Sell

Bullish: Investec, Buy, Target 1100p, +17% (27 Sept)

Average Target: 984p, +5% (30 Sept)

Bearish: Goldman Sachs, Sell, Target 770p, -18% (28 Sept)

N.B. All pricing and consensus data was sourced from Bloomberg on 30 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

10) National Grid (NG.)

Will shares return to to year lows at 805p (-28%) or post fresh all-time highs above 1150p (+3%)?

• 12 month uptrend and post-Brexit breakout
• Bullish flag pattern confirmed?
• Directional indicators diverging bullishly
• Consensus may need revising given 10% downside on average target

Broker Consensus: 20% Buy, 55% Hold, 25% Sell

Bullish: J.P. Morgan, Overweight, Target 1200p, +8% (15 Sept)

Average Target: 984p, -10% (29 Sept)

Bearish: Societe Generale, Sell, Target 790p, -29% (2 Aug)

N.B. All pricing and consensus data was sourced from Bloomberg on 29 Sept. Recommendations and target prices are revised regularly due to heightened market volatility. Please contact us for a full, up to date rundown.

How can you take advantage of these potentially attractive share price moves?

Whether you see UK stocks going up or down for the remainder of the year, tradable opportunities will present themselves regularly. We’re here to help you weed them out and capitalise on them. Accendo Markets can help you increase your profit potential with the use of leveraged instruments such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty.

CFDs: Like shares, but more flexible

Figure 1: Buying 1,450 shares in British Land @ £6.90 requires an outlay of around £10,000 plus commission (box above left), while the same exposure via a CFD requires about £500 plus commission (see above right). If a trader invests in British Land, one would assume she believes the share price is likely to move in her favour. After considering the ‘worst case scenario’ and assigning funds to cover it,  the trader may conclude there’s little point in exposing the full £10,000  to the BLND shares - some of that capital could be put to good use elsewhere in the markets.

CFDs are leveraged instruments, but you don’t have to use the leverage

If you had, say, £10,000 to invest in the stock market, you could deposit that amount into a share dealing account and purchase shares in a company. You would pay commission to open the position, 0.5% in stamp duty and the full £10,000 will be tied up in your chosen shares with any profit or loss based on that exposure.

The same £10,000 worth of exposure can be secured with a CFD for a fraction of the initial outlay thanks to leverage, with the risk and reward the same as if £10,000 worth of traditional shares were held. But should you not be interested in leverage, you can always treat CFDs like shares. Simply deposit £10,000 into a CFD trading account and take the equivalent CFD position which will tie up just £500 (note that overnight financing costs will still apply). The remaining £9,500 is not tied up, so you can use some of that to take advantage of another short-term opportunity elsewhere, or simply leave it on the account to support any losses. Best of all, using a CFD means you pay no stamp duty!

What’s your view?

Think shares will rise? Take a long position by buying CFDs (buy low, aiming to sell high). Think they’ll fall? Take a short position by selling CFDs (sell high, aiming to buy low). For a more detailed rundown of CFDs, their mechanics, associated costs and some trading scenarios click here.

The Accendo Markets Research Offering

Does your current broker’s morning report tell you all you need to know about yesterday’s news? If so, how is it offering you anything more than the plethora of information already available on the internet? What about what’s happened overnight?

We’re proud that our morning editorial has become a hot commodity in the City, its content quoted daily by the journalists that are writing the news everyone else will be reading later in the day, if not the next. Our morning report tells you what’s driving the market at that moment and what to look out for in the day ahead.

If a company has reported earnings before the market opens, we’ll tell you why the shares are called to open up or down in relation to that announcement.

We don’t simply tell you which macro-economic data prints are due at what time, we break each driver down so that you fully understand what it all means. What are the expectations in relation to the historic trend? How will this affect the trading day ahead?

The journalists don’t pay for it and neither do you, so why not give it a go? You’ve nothing to lose and perhaps a little more to gain.

Have Accendo Markets’ research delivered direct to you inbox for free

How Accendo Markets can help you

We won’t tell you what to do - it’s your call whether you buy or sell. Our aim is to provide the help you need, if you need it. We’ll highlight opportunities which may be profitable to you, the investor, and assist you in making your own trading decisions. Our approach focuses on these 3 elements:

1. Education - not obligation
2. Observations - not recommendations
3. Assistance - not persistence

Our unique, award-winning service provides you with the help and tools you need to make appropriate trading decisions in the financial markets, both to grow and protect your capital. Just imagine how you’ll feel when you’re confident enough to make you own investment and trading decisions, rather than blindly following those of an expensive advisory broker who really has no better chance of calling the market than you anyway.

Before taking a position in the Index or Stocks, be sure to contact Accendo for…

• Updates - How does the index or your preferred stock look in terms of investor sentiment? News and broker updates can emerge daily affecting share prices. Optimism can switch to pessimism in the blink of an eye depending on what’s going on around the world.
• How to use CFDs and Spread Bets to maximise your profit potential.
• How to use the tools available to minimise the risk involved