Lloyds Banking Group PLC (LSE:LLOY), Intertek Group PLC (LSE:ITRK), Melrose International PLC, Prudential PLC and WPP PLC are among the blue-chip names among the updated top picks list from UBS analysts, despite a UK macroeconomic backdrop that is less than inspiring.
Following on from note at the start of 2023 on analysts' top-conviction selections, the investment bank research team asked sector analysts to reassess their 'top picks' and 'avoids' for the UK market.
The pick with the biggest upside was PRU, with almost 55% potential upside to the analyst's target price, followed by Intertek at 45%.
Next was Weir Group PLC (LSE:WEIR) at 42.2%, WPP at 42%, Whitbread PLC (LSE:WTB) at 32.1%, Lloyds at 31.7% and British Land Company PLC (LSE:BLND) at 31.2%, Rotork at 29.8% and Melrose at 24.2%.
As for those to avoid, the biggest potential downside was at Unilever PLC (LSE:ULVR) at 28.4%, followed by Renishaw PLC (LSE:RSW) at 27.6%, IMI PLC (LSE:IMI) at 25.6% and Hammerson PLC (LSE:HMSO) and Bunzl PLC (LSE:BNZL) at 17.1%.
"The UK equity market has long reflected a balance of global factors with a strong value bias," strategist Gerry Fowler said.
The bank's analysis highlights that in this period of regime flux and potential US dollar weakness, the broad FTSE 100 index is "stuck" in a 7000-8000 range "but this stability may still lead to outperformance of weaker European and global equity markets".
Fowler said is "likely that earnings are going to decline 30% or more but valuations at ~10x forward estimated P/E compensate for this".
The FTSE 250 is even cheaper in relative terms, the strategist noted, with shares even less well owned than the blue-chips but can be volatile into downturns.
"In other words, macro opportunities in the UK don't excite us… however, our analysts highlight some most and least preferred stocks that we think present the best buy and sell opportunities."