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Lloyds Banking and Asos among 'best shares to play the UK recovery', says broker

Other banks, retailers and healthcare companies were also picked as good UK bounce-back investments

Lloyds Banking Group -

Lloyds Banking Group PLC (LON:LLOY), WH Smith PLC (LON:SMWH) and Stagecoach Group PLC (LON:SGC) are among the best shares for investors to buy for the expected UK economic recovery, according to one City broker.

Expecting the UK to see the fastest rate of recovery among major economies, analysts at Peel Hunt picked out what they see as the best bounce-back stocks.

“Clearly the market is already pricing in a gradual easing of restrictions and starting to value businesses off recovered earnings,” said head of research Charles Hall in a note to clients on Friday.

“However, we see a number of companies where the pace of recovery could be greater than expected and where there is also rating upside as visibility improves.”

The analysts see the potential for 25%-plus share price appreciation in these companies over the next three to six months as this anticipated recovery starts to materialise.

As well as Lloyds, where the shares were noted as being down 39% from their 18-month high, there were also several other financial sector names, including lenders NatWest Group PLC (LON:NWG), Barclays PLC (LON:BARC), and Virgin Money UK PLC (LON:VMUK), plus sub-prime and doorstep lenders Provident Financial PLC (LON:PFC) and Morses Club PLC (LON:MCL).

There were also several retailers alongside WH Smith, including Superdry PLC (LON:SDRY), AO World PLC (LON:AO.), Asos PLC (LON:ASC), Joules (LON:JOUL), Moonpig Group PLC (LON:MOON) and Naked Wines Plc (LON:WINE), plus other consumer-focused stocks included ten pin bowling chain Ten Entertainment Group PLC (LON:TEG) and The Gym Group PLC (LON:GYM), both of which are Peel Hunt clients.

Potential is also seen for some healthcare companies to bounce back, with Advanced Medical Solutions PLC (LON:AMS), ConvaTec Group PLC (LON:CTEC) and Spire Healthcare Group PLC (LON:SPI).

With PM Boris Johnson on 22 February due to deliver a statement setting out initial plans for easing lockdown restrictions, the broker’s analyst team expects primary schools to return on 8 March, with secondary schools either at the same time or following shortly afterwards, outdoor exercise and limited interaction allowed from March, pubs and restaurants allowed to serve customers outside from April, indoor gyms allowed to open from May, non-essential retail to open from June, indoor serving for pubs and restaurants from June, and limited overseas holidays to resume from September.

Households are also expected to continue to save more cash that would usually be spent on holidays, leisure activities and travel during in the coming year, given that many spending opportunities will remain heavily restricted.

“This should ensure a high-level of pent-up demand for certain activities, as well as continued elevated demand in other areas,” said Hall, pointing to an expected continuation on the heightened focus on home improvement.

Quick facts: Lloyds Banking Group

Price: 40.435 GBX

LSE:LLOY
Market: LSE
Market Cap: £28.64 billion
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