The Conviction List: Top ten stock buys and sells across Europe

Stocks chosen from the FTSE 350 and Stoxx 600

Tom Eckett
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Analysts from Liberum select the top 10 stocks to buy and sell
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Analysts from Liberum select the top 10 stocks to buy and sell

In Liberum's latest quarterly Conviction List, analysts have added two stocks to their top ten buys while on the sell-side there are four new entrants.

The quarterly list is pulled together by analysts proposing their highest conviction bottom-up ideas on a 12-month basis across the firm's research of 330 European stocks over nine sectors, chosen from the FTSE 350 and Stoxx 600.

Among the four entrants in the top ten sells list, Anglo American has replaced Rio Tinto as the top mining sell due to Liberum's bearish commodity outlook for 2018, while the political situation in South Africa is also causing issues for the company.

Domino's Pizza was added to the sell list after the franchise's profitability was put under pressure through a combination of cost inflation and area splits. Its recent M&A activity also raised structural concerns.

Provident Financial, a top five holding in Neil Woodford's £9.2bn Equity Income fund which tanked almost 70% last week before starting to rebound, has also been marked as a sell as analysts said the company could be facing a "funding shortfall" by June 2018, with macro uncertainties and increasing regulation also posing issues for the firm.

"Value trap" Pets at Home has also entered the top ten sell list due to the structural pressures which exist in the UK pet care sector, while relative valuation remains expensive.

Gallery: The UK's 12 most-shorted stocks

Meanwhile, two stocks were added to the top ten buy list this quarter with leisure and travel business SSP in a unique position to capitalise on global investment in the sector and the trend towards convenience foods. The management's proven track record and its portfolio of strong brands are also positive factors.

Zoopla was the other company to be added to the top ten list due to its "diversified strategy", exposing the company to a £3bn market opportunity.

The report said: "Analysts propose their highest conviction bottom-up ideas on a 12-month time horizon, with a view to the total risk-adjusted return of each stock.

"Consideration of macro themes, as well as a desire to diversify the lists across end markets, is overlaid by the strategy and stock selection team to finalise the picks."

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