Analysts from Morgan Stanley investments have named a set of stocks known for their cyclical nature that will likely be on the upswing after a coronavirus vaccine has been made available enough to lead to a recovery. In a note sent by equity analyst Matthew Garmen of Morgan Stanley said that “The valuation case for UK equities is compelling.” He followed with “The UK is the cheapest global region on a market capitalisation and median stock basis across a broader range of valuation metrics and continues to sit near historical lows relative to global equities even after accounting for differences in sector weights.”
When investors and analysts say cyclical stocks they usually mean companies that make or sell goods and services that are in demand in a positive economy. This includes things like airlines and travel, hotels and restaurants, automotive companies and luxury goods. According to the analysts the United Kingdom is expected to outperform the rest of Europe on the Financial Times Stock Exchange with a 17% gain compared to 10% respectively.
The note mentioned the United Kingdom equities appear “extremely cheap” compared to peer investments and that the United Kingdom could benefit from major support next year. “Recent vaccine news flow cements our faith in a strong recovery next year and helps the value rotation, while a Brexit deal, if and when approved, should also provide some support to UK assets.”
Here are the major stocks that were listed as good value. The first is ITV, a broadcaster in the United Kingdom which is heavily dependent on advertising that has been under extreme stress since Brexit and coronavirus has come to a head. The next one is Hays, a recruiter that has been extremely burdened by the coronavirus stop on hiring but is likely to make large gains as the pandemic lifts with major vaccine distribution. Following that is retailer Marks & Spencer, known as M&S.
M&S is still down almost 40% year to date and they expect that with the rollout of a vaccine that they will be able to easily get back what they lost. Natwest Retail Bank is another group that is set for a rebound with major in person retail gains next year, although they’ve already gone up 40% in the past two months. Finally they list Taylor Wimpey which is a homebuilder and they expect a rise in housebuilding to come with a recovering economy.