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FTSE top trending tickers of 2023

Lloyds, BT, BP, Tesco and six other stocks that moved markets

London Stock Exchange in the City of London which show the FTSE 100 index. (Yui Mok - PA Images via Getty Images)

Lloyds (LLOY.L)

Shares in FTSE-listed (^FTSE) Lloyds have been the focus of heavy debate between investors who see it as a bargain and others who wouldn’t touch it.

Lloyds is a FTSE 100 heavyweight but shares were down 17% from its high earlier this year. Banks saw their share price plumet amid the collapse of Silicon Valley Bank in the US and Credit Suisse in Europe.

In theory, the sharp rise in interest rates should have supercharged profits for the banking sector. However, despite reporting a pre-tax profit of £1.9bn ($2.38bn) for the three months to 30 September, investors were disappointed in the lack of an unscheduled dividend or buyback payout.

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Those who are bullish on the stock note that it is undervalued compared to UK and European peers and that the share price is likely to recover alongside the UK economy. There is also an attractive forward-looking dividend yielding more than 7% for 2024.

A potential windfall for shareholders is also driving hopes for a bigger-than-expected return of capital in February’s annual results.

Lloyds received £1.2bn from the owners of the Telegraph newspaper.

Shore Capital analyst Gary Greenwood said this could mean a share buyback of £2.5bn rather than £2bn previously forecast. The developments may also lift pre-tax profits for the year by about 10%.

However, other investors are keen to steer clear from Lloyds as the lender’s fate is intrinsically linked to the UK economy, which is still flirting with recession amid high inflation and higher interest rates.

BT (BT-A.L)

BT was one of the top-performers on the FTSE 100 index in December, rising 17% since a November low. However, looking back five years, the stock price is down by almost 50%.

Some analysts are bullish on the stock for 2024.

JP Morgan believes BT shares could double, as the investment bank believes that 2024 will be a “break-out” year for the telecoms sector across Europe.

The bank expects BT’s equity free cash flow generation to increase from £1.2bn this year (5% yield) to £3.2bn by the end of the decade (34% yield).

Analysts pointed to price increases as part of inflation adjustments, lower interest rates in the UK, and upside to its revenue, EBITDA, and margins as reasons to be bullish about the company.

However, this enthusiasm isn’t shared across the board, with Bank of America cutting their estimates for the company and UBS and Bereng adopting a cautious approach.

Founder of hedge fund Kintbury Capital, Chris Dale, said he is short in BT. Dale argued that BT debt levels were rising and its decision to reinstate dividends would cost the company.

BT reported revenues of £10.4bn and profits of over £1bn in its half-year results. Adjusted EBITDA rose 6% to £4.1bn (up 4% on a pro forma basis), and profit before tax increased 29 % to £1.1bn.

It is paying a dividend on 2 February, with investors receiving £0.0231 per share.

BP (BP.L)

BP is one of the world largest companies in terms of revenues and profits. However, shares in the oil company have fallen nearly 17% on the London Stock Exchange since their 2023 peak in February.

The underperformance isn’t keeping investors away as hedge funds and traders believe that the current share price is undervaluing its potential.

Analysts at RBC Capital Markets have reiterated its “outperform” rating on BP, naming the stock as the “best idea” in the global energy sector.

The broker said the current share price was undervalued, and raised RBC’s price target from £550 to £625.

Morgan Stanley has also kept its “overweight” rating on BP, although it reduced the price target to £610 from £700.

“Since announcing a market pleasing strategy update earlier in the year, BP's share price has lagged peers following two disappointing sets of results and the departure of its CEO,” Biraj Borkhataria, associate director of European research at RBC, said.

“The disappointing earnings do little to give investors confidence in BP's punchy 2025 and 2030 earnings targets, and lack of clarity on the management update has also weighed on shares, in our view.”

Looking ahead, the broker said it sees "catalysts on the horizon", including interim chief executive Murray Auchincloss potentially being confirmed as permanent boss at BP.

Tesco (TSCO.L)

Shoppers walk next to the clubcard price branding inside a branch of a Tesco Extra Supermarket in London, Britain, February 10, 2022. Picture taken February 10, 2022. REUTERS/Paul Childs
Tesco shares have been resilient amid the cost of living crisis. (Paul Childs / reuters)

Investors interested in stocks from the retail/supermarkets sector have to keep tabs on Tesco. The UK’s largest supermarket chain has seen share prices surge since July and is up 2023 this year. However, it is down 55% since 2007.

There are some jitters around the sector as the cost of living crisis hit performance. Headline retail sales dropped by 0.9% in September, according to figures from the Office for National Statistics (ONS).

But Tesco has shown resilience, after posting an increase in sales and profits in the first six months of the year and upgrading its profit forecast.

Tesco's retail adjusted operating profit was £1.42bn, ahead of analysts' average forecast of £1.35bn. UK like-for-like sales were up 8.4% in the second quarter, after rising 9% in the first quarter.

Zacks Equity Research has given Tesco a "buy" rating, quoting its forward P/E ratio of 11.99 and P/B ratio of 1.74. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities.

Barclays (BARC.L)

Barclays has had a somewhat turbulent December after reports it was to axe up to 2,000 jobs and drop thousands of its investment bank’s clients in a wider effort to increase profits and reduce costs by £1bn.

Its share price was down around 13% following Qatar’s Investment Authority’s (QIA) decision to cut a large part of its stake in the lender.

The sovereign wealth fund sold £510m, equivalent to $644m, of Barclays stock, at £1.41 each. The sale takes QIA’s stake in Barclays down to less than 3% from about 5% previously.

The UK bank is using its spare capital to buy back its stocks and in July announced a new buyback programme to retire £750m of shares. Investors are also keen on the bank’s profits and cash flow that allows for generous dividends.

However, with consumers struggling with rising prices and higher interest rates, UK lenders are seeing bad debts and loan losses increasing and Barclays is no exception.

In the third quarter, total income rose 5.2% year-on-year to £6.26bn from £5.95bn but pretax profit fell 4.3% to £1.89bn from £1.97bn.

Operating costs climbed 10% to £3.95bn, and Barclays' credit impairment charges rose to £433m from £372m.

Rolls-Royce (RR.L)

A BR700 next generation jet engine is seen at the assembly line of the Rolls-Royce Germany plant in Dahlewitz near Berlin, Germany, February 28, 2023.   REUTERS/Nadja Wohlleben
Rolls-Royce's CEO wants to quadruple profits. (Nadja Wohlleben / reuters)

Rolls-Royce has seen its market capitalisation surge over 200% over the last 12 months and over 600% since falling to its lowest point in October 2020.

The engine-maker struggled during the pandemic as aviation came to a halt but new CEO Tufan Erginbilgic is making good on his promise to turn around the UK aerospace company.

Rolls-Royce said it would quadruple its profits in the next four years and sell its electric aircraft division.

The company now has a medium-term target to deliver operating profits between £2.5bn ($3.16bn) and £2.8bn. It is also aiming for free cash flow of £2.8bn to £3.1bn, with a return on capital between 16% and 18%.

The firm is targeting a leap in its civil aerospace margin to 15% to 17%, up from 2.5% last year.

It also plans to sell between £1bn and £1.5bn of assets over the next five years, including its electric plane arm.

Analysts are bullish on the stock, with JP Morgan upgrading its rating for the aerospace engineer from "neutral" to "overweight" and hiking its target price for the stock from 235p to 400p.

Citi set a 431p target for the firm following bumps from UBS and Deutsche Bank. The pair increased the target to 400p from 350p.

Aviva (AV.L)

Shares in Aviva have gained momentum in the last months of the year, with the insurer climbing as much as 10% in one single day amid reports that it had attracted takeover interest from several international rivals.

It has previously been linked with Germany’s biggest insurer, Allianz (ALV.DE), while Canada’s Intact Financial Corporation (IFC.TO) and the Danish insurer Tryg (TRYG.CO) were also potential bidders, along with a US insurer, with a £6-a-share proposal mooted, according to the Times.

While nothing concrete has materialised yet, Aviva continues to expand and has agreed to buy the UK life insurance business of AIG (AIG) for £460m.

Under CEO Amanda Blanc, Aviva has recorded growth in its insurance, wealth, and retirement businesses in the UK, Ireland, and Canada.

In its latest trading statement, Aviva said it remains on track to exceed its medium-term targets and expects to beat its own funds generation and cash remittances targets to deliver its target of £750m gross cost reduction by 2024 one year early.

Looking ahead, Aviva said it still expects 5-7% growth in operating profit in 2023, subject to normalised weather conditions for the remainder of the year.

UBS has reaffirmed its "buy" rating on Aviva, holding the target price steady at 480 pence following the insurer's third-quarter results.

Aviva said it was committed to returning 33.4p per share to owners, representing a dividend of 8%.

Hargreaves Lansdown is also confident in the insurer’s outlook under Blanc.

“Investors have been well rewarded from the ongoing transformation, including some hefty buybacks in recent memory. It was good news as well, to hear management reiterate the full-year dividend plans, backed by a strong capital position. Although no returns are guaranteed,” Sophie Lund-Yates at Hargreaves Lansdown said in November.

Centrica (CNA.L)

British Gas owner Centrica has seen its share price more than double this year, but that high is pushing analysts against the stock.

Investors are being urged to cash in profits while they can and exit their stakes in the energy firm.

Analysts at Liberium downgraded the stock, pointing to its excessive valuation and overly optimistic assessment of long-term returns.

Bank of America and Morgan Stanley have downgraded their recommendations from “overweight” to “equal weight”.

“We see the shares now approaching fair value and see better risk-reward opportunities elsewhere in the sector,” Bank of America said.

Centrica reported an almost 10-fold surge in first-half profits in July, with an adjusted operating profit of £2.1bn in the half-year, up from £1.3bn in 2022.

The FTSE-listed company at the time said it would pay an interim dividend of 1.33p a share, up 33% from the same period last year. It also extended its share buyback programme by a further £450m.

BAE Systems (BA.L)

The Brimstone on Boxer Prototype at Rheinmetall Bae Systems Land (RBSL) where production of the new mechanised infantry vehicle begins in Telford, Britain, March 27, 2023. REUTERS/Molly Darlington
Wars in Ukraine and Gaza have pushed up sales at BAE Systems. (Molly Darlington / reuters)

A top dividend growth stock, BAE Systems has seen its share price rise 140% since late 2020.

Military tensions across the globe have been good for the defence company, with orders for submarines and fighting vehicles boosting sales to £30bn so far this year.

Analysts at Barclays expect the British defence company to book £34bn of business by the end of the year.

Shares were given an extra boost in early December when the US commerce secretary awarded BAE Systems a $35m deal to produce chips for fighter planes in its New Hampshire facility.

However, investors are beginning to wonder if the share price is too high as there is no indication of an ongoing high expenditure on defence in the next decade.

Shell (SHEL.L)

The oil major has focused on returning cash to shareholders under chief executive Wael Sawan, making investors look at the share despite oil price volatility.

Stocks have tumbled by around 10% since an October high, in line with a decline in oil prices. A cheap stock compared to peers, it has also used bumper profits from the past 18 months to embark on a share repurchasing scheme.

The latest round of share buybacks lifts total announced shareholder distributions for 2023 to approximately $23bn.

Shell reported adjusted earnings of $6.22bn for the quarter ending 30 September 2023, down 34% from a year earlier but up 23% on the second quarter of this year.

Investors also need to be aware of potential energy transition issues as Shell has largely avoided committing capital to renewable energy projects.

Overall, Shell has been a FTSE out-performer in the past three years, returning 28% per year, higher than the average 11.8% for the blue-chip index.

Watch: Investors shouldn't be on autopilot in 2024: Strategist

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