JPMorgan names ‘extremely cheap’ stocks in a market with room to rise

Published Wed, Jan 13 20211:42 AM EST

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Investment bank JPMorgan has picked a number of companies it describes as "extremely cheap," as a shift in focus towards so-called "value" stocks looks set to resume. Value stocks refer to those that go up and down with the economy. They can be underappreciated by investors and are different to "growth" stocks, which are seen as having strong earnings potential. Markets around the world have pushed to highs in 2021 in large part because investors have been making huge bets on growth stocks — especially tech companies. In a note published Monday, the JPMorgan analysts said a shift towards value continued "have legs" and picked a number of European stocks to take advantage of this trend. "We screen for deep value stocks which are trading extremely cheap, have underperformed the market and have positive earnings momentum," the analysts wrote. Mobile networks Vodafone and BT , plus Belgian network Proximus and broadcaster ITV are named as top value stocks by JPMorgan in the communications sector. Cruise company Carnival and hospitality group Whitbread are named as "deep value" stocks in the discretionary spend category, and brewer AB InBev is also a JPMorgan pick. In energy, it puts Anglo-Dutch oil company Shell as well as Italy's ENI on the list. In the financial sector, several banks are listed: Standard Chartered , Natwest Group , ING and HSBC , as well as French companies Wendel and CNP Assurances , plus Italian banks UniCredit and Intesa Sanpaolo . It also lists Austrian bank Erste Group and U.K. fund manager Hargreaves Lansdown . It puts emphasis on bank stocks due to the fact that they came into the pandemic "well capitalized," after they reduced their debt significantly following the 2008 global financial crisis. 'Exceptional divergence' In comparing current prices of growth versus value stocks, the JPMorgan's analysts said: "The sheer size of some of the divergences is exceptional." Growth stocks they said are "trading expensive" include sportswear giant Adidas , Italy's Ferrari and French luxury group Kering . JPMorgan's top health value stock is biotech company Galapagos , while in real estate it lists French group Gecina . Airplane manufacturer Dassault Aviation , support services group DCC , and German airline Lufthansa are included under industrials stock, while chemicals company Johnson Matthey and engineering group Thyssenkrupp are picks in the materials sector. The analysts argued that value stocks have historically done well as the market improves.

The JP Morgan Chase & Co. headquarters, The JP Morgan Chase Tower in Park Avenue, Midtown, Manhattan, New York.

Tim Clayton - Corbis | Corbis Sport | Getty Images

Investment bank JPMorgan has picked a number of companies it describes as "extremely cheap," as a shift in focus towards so-called "value" stocks looks set to resume.

Value stocks refer to those that go up and down with the economy. They can be underappreciated by investors and are different to "growth" stocks, which are seen as having strong earnings potential. Markets around the world have pushed to highs in 2021 in large part because investors have been making huge bets on growth stocks — especially tech companies.

In a note published Monday, the JPMorgan analysts said a shift towards value continued "have legs" and picked a number of European stocks to take advantage of this trend.

"We screen for deep value stocks which are trading extremely cheap, have underperformed the market and have positive earnings momentum," the analysts wrote.