As we enter 2024, 59% of all analysts’ recommendations are buys and just 8% are sells for constituents of the FTSE 100, the highest and lowest scores over the past ten years, respectively. For the FTSE 350 index 62% of all recommendations are positive ratings and just 7% negative ones, again the highest and lowest percentages since 2015.
Momentum players may feel inclined to stick with US equities and join the herd in running with the so-called Magnificent Seven. Contrarians may instead take to heart Mark Twain’s maxim that, ‘Whenever you find yourself on the side of the majority it is time to pause and reflect,’ and ponder whether the analysts are on to something as they champion the unloved, and thus potentially undervalued, UK stock market.
| FTSE 100 | FTSE 350 | ||||||
|---|---|---|---|---|---|---|---|
| Buys | Holds | Sells | Buys | Holds | Sells | ||
| 2015 | 47% | 39% | 14% | 49% | 39% | 12% | |
| 2016 | 47% | 40% | 13% | 48% | 40% | 12% | |
| 2017 | 45% | 40% | 15% | 47% | 39% | 15% | |
| 2018 | 49% | 37% | 14% | 48% | 38% | 13% | |
| 2019 | 52% | 36% | 12% | 51% | 38% | 11% | |
| 2020 | 46% | 38% | 16% | 47% | 39% | 14% | |
| 2021 | 54% | 35% | 14% | 54% | 35% | 12% | |
| 2022 | 57% | 34% | 9% | 59% | 32% | 8% | |
| 2023 | 57% | 34% | 9% | 60% | 32% | 9% | |
| 2024 | 59% | 32% | 8% | 62% | 30% | 7% | |
| Average 2015-2023 | 51% | 36% | 12% | 53% | 36% | 11% | |
Source: LSEG Datastream data, analysts’ consensus, London Stock Exchange. 2024 Data as of 9 January 2024
Analysts have become progressively more bullish over the past three years. While this does not look so smart in terms of the UK market’s sluggish overall performance, it makes sense, as the FTSE 100 and FTSE 350 continue to lag their global peers and thus become progressively cheaper on a relative basis (and an absolute one, as earnings and dividends continue to grow).
One way to assess which path may be the best one to follow is to study the efficacy of analysts’ stock recommendations over time and back-test the results.
The bad news is the analysts’ top picks failed to beat the FTSE 100 index in 2015, 2016, 2017, 2018, 2020, 2021 and 2022, despite all of their diligence. However, they did do in 2023 (to repeat 2019’s success), thanks to thumping gains from CRH, 3i and JD Sports Fashion.
This suggests there may be some truth in the idea that the huge flows of money into passive instruments such as exchange-traded funds (ETFs) mean there are opportunities for skilled stock-pickers.
Sceptics will counter by saying that the least popular FTSE 100 stocks with analysts, as ranked by the percentage of ‘sell’ ratings attributed to them, went up more than the most popular ones and the index overall in 2023.
This is not to poke fun. It just shows how hard picking individual stocks can be, even if it is your full-time job. Markets will tend to do what causes the greatest degree of surprise and analysts do not intentionally set out to sit on the fence. Their views and research shape the debate and help to form opinion, but markets will price in what the prevailing consensus is pretty quickly. What analysts try to do, and investors must do, is assess what the possible upside and downside surprises to the consensus could be, which is more likely, and what the impact upon a stock could be. Only then can risk and reward be properly measured.
To further the case for the defence, the least popular names in the FTSE 100 did badly, with an aggregate total return of minus 20.5% against the plus 4.7% provided by the benchmark index. Knowing which names to avoid can be every bit as valuable as knowing which names to buy.
Most popular FTSE 100 stocks by Buys in January 2023 |
|||||
|---|---|---|---|---|---|
| Buy | Hold | Sell | Buy % | Total return | |
| CRH | 7 | 0 | 0 | 100% | 86.5% |
| Shell | 18 | 1 | 0 | 95% | 5.0% |
| Endeavour Mining | 14 | 1 | 0 | 93% | 6.8% |
| JD Sports Fashion | 13 | 1 | 0 | 93% | 32.4% |
| Smurfit Kappa | 10 | 1 | 0 | 91% | 8.3% |
| Prudential | 18 | 0 | 2 | 90% | (20.1%) |
| Entain | 17 | 2 | 0 | 89% | (24.8%) |
| GlencoreÊ | 17 | 2 | 0 | 89% | (13.3%) |
| 3i | 8 | 1 | 0 | 89% | 85.5% |
| Beazley | 15 | 2 | 0 | 88% | (23.2%) |
| Total | 14.3% | ||||
| FTSE 100 total return | 7.9% | ||||
FTSE 100 least popular by Sells in 2023 |
|||||
| Buy | Hold | Sell | Sell % | Total return | |
| abrdn | 3 | 3 | 9 | 60% | 2.1% |
| Kingfisher | 3 | 9 | 7 | 37% | 8.8% |
| Rolls Royce | 4 | 7 | 5 | 31% | 221.6% |
| Sainsbury | 3 | 6 | 4 | 31% | 45.9% |
| Bunzl | 5 | 8 | 5 | 28% | 18.0% |
| Ocado | 7 | 6 | 5 | 28% | 23.0% |
| Severn Trent | 4 | 5 | 3 | 25% | 1.4% |
| Sage | 10 | 6 | 5 | 24% | 60.9% |
| Vodafone | 8 | 8 | 5 | 24% | (9.6%) |
| Rightmove | 8 | 9 | 5 | 23% | 14.3% |
| Total | 38.6% | ||||
Source: LSEG Datastream data, analysts’ consensus, Marketscreener, London Stock Exchange. 2023 ratings data as of 6 January 2023
Analysts will take less satisfaction from how their labours worked out across the FTSE 350. When it came to the broader index, the most popular selections marginally underperformed the index and the least popular ones outperformed hugely.
Most popular FTSE 350 stocks by Buys in January 2023 |
|||||
|---|---|---|---|---|---|
| Buy | Hold | Sell | Buy % | Total return | |
| Centamin | 10 | 0 | 0 | 100% | (8.3%) |
| Future | 10 | 0 | 0 | 100% | (37.1%) |
| Grafton | 9 | 0 | 0 | 100% | 20.1% |
| Network International | 9 | 0 | 0 | 100% | 30.8% |
| Diversified Energy | 8 | 0 | 0 | 100% | (43.6%) |
| EnergeanÊ | 8 | 0 | 0 | 100% | (13.1%) |
| CRH | 7 | 0 | 0 | 100% | 86.4% |
| Hill & Smith | 7 | 0 | 0 | 100% | 66.6% |
| IG Group | 7 | 0 | 0 | 100% | 4.5% |
| NCC | 7 | 0 | 0 | 100% | (33.2%) |
| Total | 7.3% | ||||
| FTSE 350 total return | 7.9% | ||||
FTSE 350 least popular by Sells in 2023 |
|||||
| Buy | Hold | Sell | Sell % | Total return | |
| abrdn | 3 | 3 | 9 | 60% | 2.1% |
| Ashmore | 4 | 2 | 5 | 45% | 1.6% |
| TUI | 0 | 4 | 3 | 43% | (20.0%) |
| KingfisherÊ | 3 | 9 | 7 | 37% | 8.8% |
| easyJet | 9 | 3 | 6 | 33% | 57.1% |
| Rolls Royce | 4 | 7 | 5 | 31% | 221.6% |
| Sainsbury | 3 | 6 | 4 | 31% | 45.9% |
| ASOS | 6 | 15 | 9 | 30% | (16.6%) |
| Bunzl | 5 | 8 | 5 | 28% | 18.0% |
| Ocado | 7 | 6 | 5 | 28% | 23.0% |
| Total | 34.1% | ||||
Source: LSEG Datastream data, analysts’ consensus, Marketscreener, London Stock Exchange. 2023 ratings data as of 6 January 2023
No analyst sets off with the intention of joining the consensus. It just so happens that their views shape that consensus and almost by definition the consensus is priced in quickly, so if anything unexpected happens (as it tends to) then share prices will diverge from the anticipated path.
The ultimate conclusion still probably has to be that broker research needs to be treated with a degree of caution (assuming that investors can get their hands on it in the first place), certainly in the cases where stocks seem universally popular.
Anyone prepared to pick their own stocks rather than pay a fund manager or index-tracker fund to do it for them simply must do their own research on individual companies before they even think about buying or selling any of its shares.
In sum, Warren Buffett seems spot on with his observation that, ‘you cannot buy what is popular and do well.’
The stunning performance of the Magnificent Seven in America will put that to the test once more in 2024 and, closer to home, investors might like to know which stocks are most liked – and disliked – by analysts at the start of 2024. The two tables below list the names which investors may wish to analyse in greater depth, or simply avoid altogether, depending upon their view of the value of the research provided.
Most popular FTSE 100 stocks by Buys in January 2024 |
||||
|---|---|---|---|---|
| Buy | Hold | Sell | Buy % | |
| Endeavour Mining | 10 | 0 | 0 | 100% |
| Smurfit Kappa | 10 | 0 | 0 | 100% |
| Beazley | 15 | 0 | 1 | 94% |
| AstraZeneca | 21 | 2 | 0 | 91% |
| DCC | 10 | 1 | 0 | 91% |
| Melrose Industries | 10 | 1 | 0 | 91% |
| Prudential | 16 | 2 | 0 | 89% |
| 3i | 8 | 1 | 0 | 89% |
| Airtel Africa | 8 | 1 | 0 | 89% |
| Intermediate Capital Group | 12 | 2 | 0 | 86% |
Least popular FTSE 100 stocks by Sells in January 2024 |
||||
| Buy | Hold | Sell | Sell % | |
| Bunzl | 5 | 5 | 6 | 38% |
| Admiral Group | 5 | 4 | 5 | 36% |
| Ocado | 6 | 4 | 5 | 33% |
| Severn Trent | 6 | 3 | 4 | 31% |
| KingfisherÊ | 5 | 8 | 5 | 28% |
| Spirax-Sarco Engineering | 6 | 5 | 4 | 27% |
| Unilever | 7 | 7 | 5 | 26% |
| Sage | 3 | 6 | 3 | 25% |
| Sainsbury | 9 | 6 | 5 | 25% |
| Antofagasta | 4 | 9 | 4 | 24% |
Source: LSEG Datastream data, analysts’ consensus, Marketscreener, London Stock Exchange. Data as of 9 January 2024
Most popular FTSE 350 stocks by Buys in January 2024 |
||||
| Buy | Hold | Sell | Buy | |
| OSB Group | 11 | 0 | 0 | 100% |
| Endeavour Mining | 10 | 0 | 0 | 100% |
| Smurfit Kappa | 10 | 0 | 0 | 100% |
| Inchcape | 10 | 0 | 0 | 100% |
| Morgan Advanced Materials | 10 | 0 | 0 | 100% |
| Serco | 10 | 0 | 0 | 100% |
| EnergeanÊ | 9 | 0 | 0 | 100% |
| Grainger | 9 | 0 | 0 | 100% |
| Hochschild Mining | 9 | 0 | 0 | 100% |
| Bytes Technology | 8 | 0 | 0 | 100% |
Least popular FTSE 350 stocks by Sells in January 2024 |
||||
| Buy | Hold | Sell | Sell | |
| abrdn | 1 | 5 | 8 | 57% |
| Hammerson | 5 | 3 | 7 | 47% |
| AO World | 2 | 1 | 2 | 40% |
| Bunzl | 5 | 5 | 6 | 38% |
| Renishaw | 3 | 2 | 3 | 38% |
| Admiral Group | 5 | 4 | 5 | 36% |
| Hargreaves Lansdown | 8 | 4 | 6 | 33% |
| Ocado | 6 | 4 | 5 | 33% |
| Ashmore | 3 | 5 | 4 | 33% |
| Ninety One | 2 | 2 | 2 | 33% |
Source: LSEG Datastream data, analysts’ consensus, Marketscreener, London Stock Exchange. Data as of 9 January 2024
Disclaimer: These articles are for information purposes only and are not a personal recommendation or advice.
Written by:
Russ Mould
Russ Mould has 28 years' experience of the capital markets. He started at Scottish Equitable in 1991 as a fund manager and in 1993 he joined SG Warburg, now part of UBS investment bank, where he worked as equity analyst covering the technology sector for 12 years. Russ joined Shares in November 2005 as technology correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media by AJ Bell Group, he was appointed AJ Bell’s Investment Director in summer 2013.
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