S&P Capital IQ’s equity research group has revealed its top ten high conviction investment selections of European equity stocks, its “Power Picks” for 2014.
Having analysed the key themes set to influence the performance of European equities over the next 12 months, the team has compiled a list of stocks it expects to outperform the broader market.
The companies selected are over a range of sectors including automotive, consumer discretionary, consumer staples, financials, healthcare, materials and information technology.
As highlighted in its 2014 European Equity Strategy Outlook report, S&P Capital IQ believes the foundations are set for a multi-year economic expansion. As deleveraging ends and banks are finally willing and able to support their economies, a vigorous investment-driven rebound will develop, aided by a restocking inventory cycle.
Furthermore, S&P Capital IQ expects that external events such as the European Central Bank’s Comprehensive Assessment and the Federal Reserve’s decision when to ‘taper’ will prove positive for European equities but will promote weakness in euro and credit markets.
“A balance sheet snapshot of European economies reveals that the capacity for future expansion is significant,” says Robert Quinn, chief European equity strategist at S&P Capital IQ. “When viewed through the lens of an income statement, the positive outlook becomes clearer.
“We expect Cyclicals’ earnings to outstrip defensive peers by at least 15 percentage points over the next twelve months, allowing the current slight overvaluation to be quickly reversed. Overall, we expect the greatest investment opportunities to be in the peripheral equity markets, based on the most spread compression and delta in earnings recovery.”
S&P Capital IQ has selected its European Power Picks for 2014 bearing this context in mind.
The Power Picks for 2014 are: ASML, Axa, BBVA, CRH, Diageo, Julius Baer, Michelin, Novo Nordisk, Unicredit and WPP.