Berenberg names its top 'cheap' global stocks set for strong growth

Published Sun, Sep 5 202111:00 PM EDT

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

Investment bank Berenberg has updated its list of top picks, naming medium-sized global firms they say are trading at a discount and have better-than-expected growth prospects. "Stocks in our EU Mid-Cap team's coverage have better-than-market near-term and medium-term expected growth. There are some very attractive single stock opportunities in European small- and mid-cap land," Berenberg's analysts stated in a research note published Sept. 2. The firm's picks are all midsized European and U.K. companies with a market capitalization of between 500 million and 10 billion euros ($593 million to $11.9 billion). The analysts said the group is currently trading at around a 10% discount to larger peers. "European large cap stocks enjoyed a decade of outperformance during the 1990s; this reversed at the turn of the century – small and mid-caps have outperformed large caps since," the analysts said. Berenberg ran several stock screens, including one it called "value+." "The screen looks for cheap stocks by screening for stocks trading on a P/E [price-to-earnings] multiple with less than a 10% premium to their five-year average and stocks with decent dividend yields," the analysts wrote. The price-to-earnings ratio is a method used to assess a company's shares and compare them to others. The picks also have "decent dividend yields, positive recent earnings momentum, strong expected medium-term earnings growth and low PEG ratios," the analysts said. PEG refers to the price/earnings to growth ratio that investors use to analyze a company's performance and risk. Stock picks Stock picks in the value+ screen include Irish bank AIB Group, British insurer Beazley and Spain's Banco de Sabadell . French auto suppliers Valeo and Faurecia , and SAF-Holland , a Dutch auto parts company, also make the list. Similarly, the analysts liked British energy companies John Wood and Centrica . They also picked German lottery company Zeal Network , French interiors company Maisons du Monde , German construction equipment company Wacker Neuson and British engineering firm Vesuvius . "We think stocks with these characteristics look attractive in equity markets currently trading close to all time highs, with the upside potential to participate in a continued recovery in corporate profits," the analysts stated of the picks in the value+ screen.

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Investment bank Berenberg has updated its list of top picks, naming medium-sized global firms they say are trading at a discount and have better-than-expected growth prospects.