In conversation: 10 for 19 - Investment ideas for 2019

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Raymond Greaves, Head of Research at finnCap, shares our research team's annual investment ideas for 2019. In doing so, we look back on the last 12 months of market performance, including the turbulent Q4 of 2018, and how macroeconomic factors such as Brexit will be affecting performance for the next year. 

Read the summary note below.

10 for 19 | Investment ideas for 2019 

It is always darkest just before dawn and we are starting to feel that – disaster aside (eg no deal Brexit followed by a Labour Government) – after a proper correction in Q4 2018, the market will soon start to find a level from which the best stocks will again emerge. We have no idea how the key geopolitical issues of 2019 will play out. What we do know is the following: the UK remains a treasure trove of good quality growth businesses, now at much cheaper valuations than 12 months ago.

Despite some recent earnings downgrades, the small/mid-cap segment as a whole offers 6.0% sales growth, 13.4% EBIT growth and 5.4% dividend growth, consensus expectations that have remained remarkably robust over the past year. This is balanced by a market valuation of 11.8x EBIT and 13.5x earnings – substantially cheaper than the beginning of 2018. On this basis, we have chosen ten of our favourite ideas for 2019. As usual, there is no specific theme; we are simply trying to identify quality companies where there is overlooked value or self-help potential (for instance through M&A).

Interestingly, four of our ideas have entirely US dollar earnings, thus insulated from the political issues in the UK.

Raymond Greaves – Head of Research – rgreaves@finncap.com