Analysts at Liberum Capital expect the building materials and equipment hire sector to recover in 2023 with the rotation that impacted the sector in 2022 anticipated to reverse when inflation and interest rate expectations peak.
The London-based broker's analysts see strong labour markets, good infrastructure demand, and mega-projects in the US as mitigating factors in any potential downturn in demand.
They recommend three high-quality companies in the sector as top picks: Ashtead Group PLC (LSE:AHT), Howden Joinery Group (LSE:HWDN) PLC, and Volution Group PLC (LSE:FAN).
The analysts also identify four other high-quality companies with the potential for significant upside: Luceco, SigmaRoc, Speedy Hire, and Tyman (LSE:TYMN).
They believe that the sell-off across the sector has been driven by rotation rather than a careful assessment of risk and reward.