Barclays Capital has named six London-listed stocks to purchase because it believes the U.K. stock market is currently “low-cost” and “under-owned.” Two of the investment bank’s picks — Drax Group and IG Holdings — are also predicted to rise by greater than 50% in the following 12 months, due to several policy tailwinds. The bank said that the return of fiscal credibility on the British government has reduced the pressure on the Bank of England to overtighten and may provide some relief to beaten-down domestic and small-cap stocks. The U.K. economy has been under pressure following former Prime Minister Liz Truss’ disastrous “mini-budget” in September, which prompted banks to withdraw lending amid concerns over spiking rates of interest. “Financial conditions tightened materially last 12 months amid a weakening growth backdrop, however the recent decline in energy prices does relieve stagflationary pressures somewhat,” said analysts on the bank in a research note to clients on Jan. 23. “This could help the export-oriented FTSE 100/large caps space, which we proceed to prefer.” “The region stays low-cost, under-owned, and advantages from favorable sector exposure between value/commodities and defensives,” the analysts added. Drax Group Drax, which runs one in all the last remaining biomass and coal-fueled power stations within the U.K., is one in all Barclays’ preferred stocks. The investment bank said the clarity on windfall regulations set by the U.K. government, a gorgeous valuation, and a series of catalysts expected to come back into play soon helps the stock’s growth outlook. “Drax should see rising earnings upgrades because it starts to sell power beyond its current hedged position, at increasingly higher prices,” the analysts led by Emmanuel Cau said. Barclays expects the stock to rise by 72% to £11 ($12. 4) over the following 12 months. Drax shares were trading around £6.37 on Friday. IG Group Shares of stockbroker IG Group could rise by 55% over the following 12 months to £12 a share, Barclays analysts have said. The investment bank believes a high-interest rate environment allows the stockbroker to earn interest on a customer’s deposit, further increasing its profit margins. “As market conditions normalise, I.G. delivered flat revenues in core markets+ in FY22 vs FY21A. We consider growth needs to be achieved over again in FY23E, helped by customer recruitment throughout the pandemic,” the analysts said. The corporate reported net profits of £240 million on revenues of £519 million for the primary half of its financial 12 months last week. IGG-GB 5Y line Barclays also named the infrastructure investment company 3i Group , pharmaceutical giant AstraZeneca , food additive and chemicals giant Tate & Lyle , and mine engineering specialist Weir Group as its other favorite stocks to own.
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