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Q4’s Top 10 Stock Picks – P2 – Top/Bottom Performers

This year’s outperformers

Online grocer Ocado has had a bumper performance this year after inking partnership deals with major supermarket chains. Sky M&A saga ended with Comcast taking over the company, which is soon set to be delisted.

Steelmaker Evraz benefited from exposure to US market, which shielded it from some of President Trump’s EU steel tariffs. Retailer Next remained resilient in the face on shaky outlook for UK high street.

Supermarket Sainsbury unveiled a takeover bid for rival Asda which would create UK’s biggest supermarket chain. Its rival Morrison continued strong revenue growth and could be eyeing a merger with smaller peer Co-op to stave off competitive pressure, should the Sainsbury/Asda merger succeed.

Whitbread shares made a significant jump after the company sold its subsidiary Costa Coffee to Coca-Cola for £3.9bn. Consumer credit ratings agency Experian issued positive results in July with a 10% higher year-on-year revenue. Investment platform Hargreaves Lansdown started offering a new lucrative cash savings product that has been in the works for several years.

… and last quarter’s

Looking at the past quarter in isolation, some of the same names repeat from the previous list, including Evraz, Whitbread, Sky and Hargreaves Lansdown, pointing to a more sustained positive momentum from these companies.

Among other Q3 outperformers, AstraZeneca is notable for reaching fresh record highs in mid-August thanks to a string of new drug approvals in major markets. Its sector peer Shire continued negotiations with Japanese pharmaceutical company Takeda over a merger.

Consumer goods giant Reckitt Benckiser served as a reliable safe-haven for investors looking for shelter during recent market turbulence. That said, rising bond yields are starting to hurt defensive stocks, as investors prefer US sovereign debt to equities in the time of uncertainty.

Cruise ship operator Carnival benefited from warm summer weather that increased the number of bookings for holidaymakers. Insurance provider Admiral also benefited from a benign summer which led to lower levels of road accidents and insurance pay-outs.

And what of the underperformers? Which companies had a tough time in the last quarter, as well as in 2018 overall. Turn to the next page to read more about them.

Struggling stocks this year

Mexican silver miner Fresnillo struggled this year, with the stock’s poor overall performance continuing into Q3. The company suffered a dual blow of falling silver prices (-15% from summer highs) and the US-Mexico trade war.

Vodafone continued to be burdened by high levels of debt and uncertain growth rates in major geographies. Tobacco manufacturer British American Tobacco came under pressure as US authorities started probing the effects of tobacco-substitute products on health.

Corporate profits warnings were also a major theme for underperforming stocks this year.

Royal Mail warned on lower operating profits in 2019 due to rising cost pressures and lower productivity. IT developer Micro Focus issued several profits warnings throughout the year, leading to a large sell-off in its shares, however, it also announced a share buyback programme that contributed to the stock’s rebound of over 72% from 2018 lows.

Budget carrier easyJet struggled with the effects of rising oil prices which increased the airlines’ fuel costs. Wealth-management company Standard Life Aberdeen lost a major contract with Lloyds Banking to operate its £109bn pension scheme. DIY retailer Kingfisher announced weak results in its French business unit.

Summer blues

During the latest quarter, Paddy Power Betfair earnings prospects were hit by lower online exchange revenue, as well as increased regulatory pressure over UK FOBT terminals.

Energy utility company SSE warned on lower profits and its shares remained under the cloud of an investigation by UK’s Ofgem energy regulator. RSA Insurance was yet another issuer of profit warnings, blaming poor outlook on weakness in the UK insurance market.

Food delivery company Just Eat was feeling competitive pressures after reports that Uber Eats was considering a merger with UK rival Deliveroo.

Retail and food group Associated British Foods shares were trading lower in Q3 after the company announced a negative outlook for its sugar division and reported 2% lower sales in its Primark subsidiary. Shares in Chilean miner Antofagasta faired equally poorly as global copper prices retreated 16% below 2018 highs and the US-China trade confrontation damaged the UK Index ’s heavyweight Mining sector.

Over the next several pages, read in more detail about 10 potential investment opportunities that can develop in Q4 2018.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.


Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

Prepared by Michael van Dulken, Head of Research

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