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Jan. 13, 2021, 10:41 a.m. EST

Under-owned and cheap: Why Barclays has turned more bullish on U.K. stocks

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By Barbara Kollmeyer

While treading water on Wednesday, the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.61% has had an impressive performance in 2021 thus far, as investors have shifted into companies that could prosper while COVID-19 vaccines drive economic recoveries.

The index /zigman2/quotes/210598409/delayed UK:UKX +0.61% is up 4.5% for the year, versus a 2.6% rise for the Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.21% and 1.3% for the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.61% .

Those so-called value plays, such as mining and energy stocks, are heavily represented on the U.K. index. Heavyweights BP /zigman2/quotes/202286639/delayed UK:BP +5.13% /zigman2/quotes/207305210/composite BP -0.88% , Royal Dutch Shell and Anglo American /zigman2/quotes/201381512/delayed UK:AAL +1.33% /zigman2/quotes/201381512/delayed UK:AAL +1.33% have all seen double-digit gains for the few days of trading in 2021 so far.

A “cheap reflation play, with a defensive hedge,” is how strategists at Barclays describe U.K. equities right now, as they upgraded the asset class to neutral or marketweight, “after an awful 2020,” in a note to clients on Wednesday.

“Defensive sector weights make the U.K. an unlikely outperformer, but provide a hedge. Brexit will hit GDP for years to come and U.K.’s COVID outcome is amongst the worst, but consequently it could see a bigger activity rebound if vaccines succeed,” said a team led by Emmanuel Cau.

“Global PMs [portfolio managers] have shied away from U.K. exposure over the last four years. This was mostly due to the binary tail risk of a ‘crash-out’ outweighing the attractiveness of U.K. assets, but also because tech/growth-heavy indexes were the only place to be,” said the strategists. “The U.K. is relatively cheap and under-owned but this has begun to reverse, with domestic plays and GBP seeing a bid lately. “

As for the sectors they like, the strategists highlight commodities, financials, industrials and discretionary stocks, and say avoid health care, staples, telecoms and real estate.

Their overweighted stocks include energy giant BP /zigman2/quotes/207305210/composite BP -0.88% /zigman2/quotes/202286639/delayed UK:BP +5.13% , miner Anglo American /zigman2/quotes/201381512/delayed UK:AAL +1.33% , mining equipment group Weir /zigman2/quotes/201865002/delayed UK:WEIR -0.33% , outsourcing group Serco /zigman2/quotes/202143031/delayed UK:SRP -0.98% , low-cost airline Wizz Air /zigman2/quotes/210449062/delayed UK:WIZZ -1.79% , home builder Redrow /zigman2/quotes/206663416/delayed UK:RDW +0.38% , catering group SSP /zigman2/quotes/205370875/delayed UK:SSPG +0.93% , bakery chain Greggs /zigman2/quotes/205743109/delayed UK:GRG -1.15% , antivirus software group Avast , global advertising group WPP /zigman2/quotes/202300097/delayed UK:WPP +0.59% /zigman2/quotes/203813176/composite WPP -1.78% , direct marketer 4imprint Group /zigman2/quotes/207133667/delayed UK:FOUR -0.65% , telecom BT /zigman2/quotes/209006687/delayed UK:BT.A +1.50% , drug company AstraZeneca /zigman2/quotes/200304487/composite AZN +0.13% /zigman2/quotes/203048482/delayed UK:AZN +0.19% , medical products and technologies company ConvaTec /zigman2/quotes/204036468/delayed UK:CTEC +0.33% , grocer Tesco /zigman2/quotes/203761082/delayed UK:TSCO +0.32% , tobacco giant Imperial Brands /zigman2/quotes/208789104/delayed UK:IMB -0.59% , consumer-goods group Unilever /zigman2/quotes/204685760/composite UL -0.49% /zigman2/quotes/205449809/delayed UK:ULVR -0.77% , electricity and gas manager National Grid /zigman2/quotes/208805676/delayed UK:NG +0.58% /zigman2/quotes/204048449/composite NGG +0.90% , Lloyds Banking Group /zigman2/quotes/200709414/composite LYG -0.39% /zigman2/quotes/202285510/delayed UK:LLOY +1.15% , Legal & General /zigman2/quotes/201125471/delayed UK:LGEN 0.00% , private equity and venture capital group 3i /zigman2/quotes/202254899/delayed UK:III -0.24% and property investment and development group Segro /zigman2/quotes/205428601/delayed UK:SGRO -0.81% .

/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,884.67
+47.96 +0.61%
Volume: 121,903
Feb. 7, 2023 11:07a
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,884.67
+47.96 +0.61%
Volume: 121,903
Feb. 7, 2023 11:07a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
458.10
+0.94 +0.21%
Volume: 0.00
Feb. 7, 2023 12:07p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,111.08
-25.40 -0.61%
Volume: 0.00
Feb. 6, 2023 4:57p
loading...
/zigman2/quotes/202286639/delayed
UK : U.K.: London
502.90 p
+24.55 +5.13%
Volume: 24.09M
Feb. 7, 2023 11:07a
P/E Ratio
N/A
Dividend Yield
3.98%
Market Cap
£87.49 billion
Rev. per Employee
£2.66M
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/zigman2/quotes/207305210/composite
US : U.S.: NYSE
$ 34.84
-0.31 -0.88%
Volume: 14.22M
Feb. 6, 2023 4:00p
P/E Ratio
N/A
Dividend Yield
3.89%
Market Cap
$105.92 billion
Rev. per Employee
$3.38M
loading...
/zigman2/quotes/201381512/delayed
UK : U.K.: London
3,396.50 p
+44.50 +1.33%
Volume: 335,197
Feb. 7, 2023 11:07a
P/E Ratio
7.89
Dividend Yield
5.83%
Market Cap
£45.68 billion
Rev. per Employee
£446,346
loading...
/zigman2/quotes/201381512/delayed
UK : U.K.: London
3,396.50 p
+44.50 +1.33%
Volume: 335,197
Feb. 7, 2023 11:07a
P/E Ratio
7.89
Dividend Yield
5.83%
Market Cap
£45.68 billion
Rev. per Employee
£446,346
loading...
/zigman2/quotes/207305210/composite
US : U.S.: NYSE
$ 34.84
-0.31 -0.88%
Volume: 14.22M
Feb. 6, 2023 4:00p
P/E Ratio
N/A
Dividend Yield
3.89%
Market Cap
$105.92 billion
Rev. per Employee
$3.38M
loading...
/zigman2/quotes/202286639/delayed
UK : U.K.: London
502.90 p
+24.55 +5.13%
Volume: 24.09M
Feb. 7, 2023 11:07a
P/E Ratio
N/A
Dividend Yield
3.98%
Market Cap
£87.49 billion
Rev. per Employee
£2.66M
loading...
/zigman2/quotes/201381512/delayed
UK : U.K.: London
3,396.50 p
+44.50 +1.33%
Volume: 335,197
Feb. 7, 2023 11:07a
P/E Ratio
7.89
Dividend Yield
5.83%
Market Cap
£45.68 billion
Rev. per Employee
£446,346
loading...
/zigman2/quotes/201865002/delayed
UK : U.K.: London
1,812.00 p
-6.00 -0.33%
Volume: 20,208
Feb. 7, 2023 11:03a
P/E Ratio
27.97
Dividend Yield
1.42%
Market Cap
£4.78 billion
Rev. per Employee
£177,480
loading...
/zigman2/quotes/202143031/delayed
UK : U.K.: London
150.80 p
-1.50 -0.98%
Volume: 241,953
Feb. 7, 2023 11:00a
P/E Ratio
11.56
Dividend Yield
1.69%
Market Cap
£1.71 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/210449062/delayed
UK : U.K.: London
2,800.00 p
-51.00 -1.79%
Volume: 87,896
Feb. 7, 2023 11:04a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
£2.98 billion
Rev. per Employee
£537,255
loading...
/zigman2/quotes/206663416/delayed
UK : U.K.: London
534.00 p
+2.00 +0.38%
Volume: 27,768
Feb. 7, 2023 10:58a
P/E Ratio
9.30
Dividend Yield
5.99%
Market Cap
£1.73 billion
Rev. per Employee
£934,906
loading...
/zigman2/quotes/205370875/delayed
UK : U.K.: London
271.50 p
+2.50 +0.93%
Volume: 163,113
Feb. 7, 2023 11:05a
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£2.19 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/205743109/delayed
UK : U.K.: London
2,742.00 p
-32.00 -1.15%
Volume: 38,593
Feb. 7, 2023 10:59a
P/E Ratio
23.66
Dividend Yield
2.08%
Market Cap
£2.85 billion
Rev. per Employee
£54,739
loading...
/zigman2/quotes/202300097/delayed
UK : U.K.: London
1,020.50 p
+6.00 +0.59%
Volume: 403,044
Feb. 7, 2023 11:05a
P/E Ratio
18.16
Dividend Yield
3.30%
Market Cap
£11.02 billion
Rev. per Employee
£122,725
loading...
/zigman2/quotes/203813176/composite
US : U.S.: NYSE
$ 60.82
-1.10 -1.78%
Volume: 70,357
Feb. 6, 2023 4:00p
P/E Ratio
16.20
Dividend Yield
3.28%
Market Cap
$13.34 billion
Rev. per Employee
$163,128
loading...
/zigman2/quotes/207133667/delayed
UK : U.K.: London
4,570.00 p
-30.00 -0.65%
Volume: 2,804
Feb. 7, 2023 10:51a
P/E Ratio
31.78
Dividend Yield
1.23%
Market Cap
£1.30 billion
Rev. per Employee
£611,538
loading...
/zigman2/quotes/209006687/delayed
UK : U.K.: London
132.30 p
+1.95 +1.50%
Volume: 3.41M
Feb. 7, 2023 11:07a
P/E Ratio
7.71
Dividend Yield
5.82%
Market Cap
£13.36 billion
Rev. per Employee
£212,449
loading...
/zigman2/quotes/200304487/composite
US : U.S.: Nasdaq
$ 63.52
+0.08 +0.13%
Volume: 4.70M
Feb. 6, 2023 4:00p
P/E Ratio
97.30
Dividend Yield
2.24%
Market Cap
$198.48 billion
Rev. per Employee
$544,657
loading...
/zigman2/quotes/203048482/delayed
UK : U.K.: London
10,600.00 p
+20.00 +0.19%
Volume: 213,234
Feb. 7, 2023 11:06a
P/E Ratio
96.64
Dividend Yield
2.09%
Market Cap
£163.94 billion
Rev. per Employee
£426,154
loading...
/zigman2/quotes/204036468/delayed
UK : U.K.: London
242.00 p
+0.80 +0.33%
Volume: 170,209
Feb. 7, 2023 11:03a
P/E Ratio
81.21
Dividend Yield
1.89%
Market Cap
£4.95 billion
Rev. per Employee
£154,004
loading...
/zigman2/quotes/203761082/delayed
UK : U.K.: London
247.30 p
+0.80 +0.32%
Volume: 5.10M
Feb. 7, 2023 11:07a
P/E Ratio
20.02
Dividend Yield
4.67%
Market Cap
£17.95 billion
Rev. per Employee
£183,190
loading...
/zigman2/quotes/208789104/delayed
UK : U.K.: London
2,031.00 p
-12.00 -0.59%
Volume: 256,818
Feb. 7, 2023 11:07a
P/E Ratio
12.33
Dividend Yield
6.95%
Market Cap
£19.04 billion
Rev. per Employee
£658,210
loading...
/zigman2/quotes/204685760/composite
US : U.S.: NYSE
$ 50.27
-0.25 -0.49%
Volume: 1.41M
Feb. 6, 2023 4:00p
P/E Ratio
19.73
Dividend Yield
3.54%
Market Cap
$127.47 billion
Rev. per Employee
$427,636
loading...
/zigman2/quotes/205449809/delayed
UK : U.K.: London
4,131.50 p
-32.00 -0.77%
Volume: 470,559
Feb. 7, 2023 11:07a
P/E Ratio
21.56
Dividend Yield
3.52%
Market Cap
£105.29 billion
Rev. per Employee
£322,051
loading...
/zigman2/quotes/208805676/delayed
UK : U.K.: London
1,046.00 p
+6.00 +0.58%
Volume: 351,061
Feb. 7, 2023 11:05a
P/E Ratio
12.19
Dividend Yield
4.93%
Market Cap
£38.01 billion
Rev. per Employee
£715,281
loading...
/zigman2/quotes/204048449/composite
US : U.S.: NYSE
$ 62.90
+0.56 +0.90%
Volume: 274,825
Feb. 6, 2023 4:00p
P/E Ratio
11.35
Dividend Yield
4.92%
Market Cap
$46.02 billion
Rev. per Employee
$919,300
loading...
/zigman2/quotes/200709414/composite
US : U.S.: NYSE
$ 2.53
-0.01 -0.39%
Volume: 8.37M
Feb. 6, 2023 4:00p
P/E Ratio
N/A
Dividend Yield
3.99%
Market Cap
$43.50 billion
Rev. per Employee
$378,104
loading...
/zigman2/quotes/202285510/delayed
UK : U.K.: London
53.44 p
+0.61 +1.15%
Volume: 21.88M
Feb. 7, 2023 11:06a
P/E Ratio
N/A
Dividend Yield
3.99%
Market Cap
£35.93 billion
Rev. per Employee
£296,213
loading...
/zigman2/quotes/201125471/delayed
UK : U.K.: London
256.70 p
0.00 0.00%
Volume: 1.15M
Feb. 7, 2023 11:07a
P/E Ratio
7.55
Dividend Yield
7.29%
Market Cap
£15.52 billion
Rev. per Employee
£1.28M
loading...
/zigman2/quotes/202254899/delayed
UK : U.K.: London
1,630.50 p
-4.00 -0.24%
Volume: 184,401
Feb. 7, 2023 11:07a
P/E Ratio
4.41
Dividend Yield
3.10%
Market Cap
£15.83 billion
Rev. per Employee
£2.42M
loading...
/zigman2/quotes/205428601/delayed
UK : U.K.: London
860.00 p
-7.00 -0.81%
Volume: 238,799
Feb. 7, 2023 11:02a
P/E Ratio
2.54
Dividend Yield
2.91%
Market Cap
£10.70 billion
Rev. per Employee
N/A
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