Analysts at Credit Suisse have named their top European stock ideas for the fall, which they say have appealing valuations and strong momentum. The Swiss bank publishes a list of 30 stock recommendations every quarter, using its proprietary analysis of cash flow to assess companies' future expected performance. "For Q4 [fourth quarter] 2021 our stock selection mainly focuses on high operational quality companies with attractive valuations and strong momentum," the bank said in a note on Oct. 4. This quarter's selection includes seven new additions to the list that the Swiss bank deems "best-in-class". Integrated oil and gas company OMV is the only energy player on the list for this quarter, after it delivered the second-highest returns among its peers in 2020, according to the bank. The analysts also like the Austrian company for its lower debt level vis-a-vis its European peers, along with its ability to service its commitments and capital allocation decisions. The company could potentially see an improved valuation of 15% over the longer-term, the analysts, led by Hiten Patel, wrote in the note. British financial services firm Legal & General is viewed by Credit Suisse as a "best-in-class UK pension play," with the analysts citing the firm's consistent track record of delivering "high and stable returns of 15% prior to the pandemic." The firm is expected to achieve annual growth of 8% till 2025, with potential for significant upside to its valuation, the analysts added. French asset manager Amundi — Europe's largest — made the list too. Amundi has "one of the highest operating margins" amongst its peers and an industry-leading dividend yield of 5.2%, the bank said. Credit Suisse believes the stock has a 24% potential upside. In the industrials space, Credit Suisse likes technology group Andritz as a strong momentum play. Shares in the industrial machinery supplier have "returned 26.4% over the last six months, outperforming its European peers by nearly 20%." Still, "momentum remains strong," the analysts said, giving it 20% potential upside. The Swiss bank also likes Andritz for its ability to service its commitments. Swiss technology group Bucher is another industrials name favored by Credit Suisse. The analysts called it a "best-in-class name" with "strong wealth creation principles throughout its history" and a track record of "growing into increasing returns during cyclical upswings". While returns were impacted by the pandemic, they are expected to rebound to pre-pandemic levels this year, the analysts opined. The stock has 25% potential upside, according to the analysts. Credit Suisse also likes software and technology solutions provider SAP for its stable returns over the last 2 years. It is also positive on the firm's shift in business model from licensing to cloud and web-based software products, including its "holistic offering for business transformation in the cloud." The Swiss bank noted that SAP is undervalued compared to its global peers, and gives it a potential upside of 34%. Rounding off the "best-in-class" new additions on the list is Belgium-based real estate developer VGP. Credit Suisse describes the company as having "one of the strongest momentum profiles in European real estate," as well as a strong development pipeline with 42 sites currently being developed. In addition to the growth of its land bank, the company also enjoys strong pre-leasing commitments, the analysts said. They give the stock an potential upside of 15% over the next 5 years.
A Credit Suisse logo in the window of a Credit Suisse Group AG bank branch in Zurich, Switzerland.
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Analysts at Credit Suisse have named their top European stock ideas for the fall, which they say have appealing valuations and strong momentum.