By Steve Goldstein
The upcoming Commonwealth Games have the opportunity to focus investor minds on the U.K.’s “Mittelstand” in the Greater Birmingham region, an analyst says.
Mittelstand is the German word for small- to medium-sized enterprises. The Commonwealth Games, a mini Olympics for former members of the British Empire, are due to be held in Birmingham starting July 28.
“The heart of the Midlands was the birthplace of the industrial revolution which began in the 18th century. Birmingham is a major city in the West Midlands and is still home to the UK automotive industry and a profusion of SMEs,” said strategists at Jefferies led by Sean Darby.
U.K. SME stocks appear to have a decent return on equity and value, they said. They screened for industrials offering both value and quality, coming up with a list including Mitie Group /zigman2/quotes/201200333/delayed UK:MTO -0.70% , Pagegroup /zigman2/quotes/203982351/delayed UK:PAGE -0.27% , SThree /zigman2/quotes/205752173/delayed UK:STEM -0.73% , Avon Protection /zigman2/quotes/209664543/delayed UK:AVON +0.62% and Morgan Advanced Materials /zigman2/quotes/208158435/delayed UK:MGAM 0.00% .
“We continue to like the UK banks whose dividend yield is half the multiple of the PE – a value investor’s dream whilst trading on fair PEG ratios,” they added. That description, on Jefferies numbers, can be applied to Bank of Georgia /zigman2/quotes/206519596/delayed UK:BGEO -0.86% , Barclays /zigman2/quotes/208409333/delayed UK:BARC +0.47% , Lloyds Banking Group /zigman2/quotes/202285510/delayed UK:LLOY -0.12% , OSB Group /zigman2/quotes/201874630/delayed UK:OSB -0.53% , TBC Bank /zigman2/quotes/203300407/delayed UK:TBCG -0.53% and Virgin Money UK /zigman2/quotes/207233909/delayed UK:VMUK -1.25% .
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.56% edged up 0.1% in afternoon trade, with investors hesitant ahead of the Fed minutes, due after the London Stock Exchange close. Supermarket delivery firm Ocado /zigman2/quotes/207225647/delayed UK:OCDO +1.25% rose 4% to lead the U.K. benchmark, while movie-chain operator Cineworld surged 20% to be the top performing FTSE 250 stock.