高盛-深度策略 Strategy Espresso Buy British09032024

2September2024|5:05AMBST

StrategyEspresso:BuyBritish

SharonBell

+44(20)7552-1341|sharon.bell@GoldmanSachsInternational

NatashaTiwana

+44(20)7552-3305|

natasha.tiwana@

GoldmanSachsInternational

UKequitieshaveperformedwellyear-to-dateandprovedresilientintheearlyAugustcorrection.Thiscomesafteroveradecadeofpersistentunderperformance:theUKweightinMSCIWorldhasfallento2.2%from5.3%in2010.

WeseeseveralsupportsforUKstocks:

+44(20)7552-5782|

peter.oppenheimer@GoldmanSachsInternational

LiliaPeytavin

+33(1)4212-1716|lilia.peytavin@GoldmanSachsBankEuropeSE-ParisBranch

GuillaumeJaisson

+44(20)7552-3000|

guillaume.jaisson@

GoldmanSachsInternational

PeterOppenheimer

nFTSE100:Thelargecapindexhasashareholderyieldof6%(dividendplus

buybacks).TheindexcanalsoprovidegooddiversificationfromtheconcentratedandTech-heavyS&P500.TheFTSE100tradesonasharpvaluationdiscount

evenadjustedforsectorexposureandexpectedgrowth.

nFTSE250/UKDomestic(GSSTUKDE)/Retailers:Mid-capsalsotradeonalowvaluationand,inaddition,areexposedtoimprovedUKeconomicmomentum,

pent-updemandfromhighhouseholdsavingslevelsandfallinginterestrates.Supply-sidereformsinareassuchashomebuildingshouldalsobesupportive.

WhydoestheUKtradeatadiscount?DomesticinvestorshavealowpropensitytoallocatetoUKequity.Wearguethatthishaspusheddownvaluationsandhas

createdabackdropwheremanagementsseektore-listabroad,takethecompanyprivateoraggressivelybuybackshares.Whilethesestrategiesarelikelytocontinue

–andthemselvesprovideafloortovaluations–wethinkpolicy-makersareincreasinglyacknowledgingthatthisisnothealthyfortheeconomy.

ThepreviousgovernmentproposedaBritishISAandthenewgovernmentis

conductingaPensionReview.Thisishelpful,althoughitwilllikelytaketimeto

_

manifestinvaluations.Thesizeablegovernmentdeficitandupcomingbudgethavebeeninfocusinrecentweeks;weseethisasasmallnegativebutonethatis

alreadypriced.

WecontinuetorecommendFTSE250vs.MSCIWorld.WealsolikeFTSE100foritslowvaluation,buyback,anddiversificationcharacteristics.Wehighlightfromour

TacticalResearchteamascreenofUKstocksrecommendedbyourEquityanalysts,wheretheyhavehighupsidetotargetpricesandareaboveconsensusonEPS.

GoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.

Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegAC

certificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto/research/hedge.html.

GoldmanSachs

StrategyEspresso

ThecasetoBuyBritish

1.Oneofthebetter-performingassetsYTD.TheFTSE100hasdelivereda6%patotalreturninthelast10yearsversus8%forEuroSTOXX50and13%fortheS&P500.

SomeofthisunderperformanceisduetoweakearningsbutmuchofitowestoasharpdeclineinvaluationasinvestorshaveshunnedUKstocks.Wethinkthreefactorsexplainthepersistentunderwhelmingreturns:(i)theabsenceofalargelistedTechsector,(ii)apoliticallyturbulentperiodfortheUKpostthe2016EUReferendum,and(iii)alackof

domesticinvestorswilling/abletoputmoneyintohome-grownstocks.

Thatsaid,year-to-datetheFTSE100andFTSE250(themid-capindex)haveperformedwellversusotherindicesandassetclasses.Doesthismeanthatthependulumis

swingingbacktoUKstocks?WethinkthereisastrongcasefordiversificationintoUKequities,whichlookinexpensive,offerhighshareholderreturns(withadividendand

buybackyieldof6%)and–forthemid-caps–shouldbenefitfromacontinuedmodesteconomicrevival.

Exhibit1:Year-to-date,FTSE100andFTSE250haveperformedwellversusotherindicesandassetclasses

YTDtotalreturnperformanceinGBP

Gold

_

24%

20%

16%

12%

8%

4%

0%

-4%

-8%

-12%

S&P500

UKDomestic

MIB

IBEX35

FTSE100

FTSE250

SMI

EuroStoxx50

STOXX600

DAX

MXAPJ

Topix

EuropeDefensives

MSCIEM

EuropeCyclicals

Italy10Year

CAC40

UK10Year

Spain10Year

GSCIEnergyIndex

US10year

Germany10Year

MDAX

Source:Datastream,Bloomberg,GoldmanSachsGlobalInvestmentResearch

2.AstrongdiversificationcaseforFTSE100.AswediscussedinConcentration

Conundrum,theUSmarketlooksbothexpensiveandhighlyconcentratedinafew

names,allessentiallyinthesamesectororwithcloselyrelatedcharacteristics.TheUKmarkethasnolargecapTech(whichisclearlynotagoodsignforthelongterm)but

doeshaveplentyofdeepvaluesectors(Financials,Energy,Miners),aswellaslargeweightsinHealthcareandConsumerStaples.ThismakesUKstocks,especiallytheFTSE100,defensiveandlowbetatocertainrisks.

TheFTSE100outperformedintheAugustsell-off.Itisalsolessexposedtotariffsandtraderestrictions;itsbetatoglobaltradeislowversusothermarkets(Exhibit3).TheUKingeneralislessexposedtotradeflowrestrictionsthanotherEuropeanmarketsgiventhattheeconomyislessexposedtothemanufacturingsector.

2September20242

GoldmanSachs

StrategyEspresso

Exhibit2:FTSE100isdefensiveandconcentratedinsectorswithdeepvalue

10ycorrelationofw/wrelativereturns(vs.MSCIACWorld)withGlobalGrowthvs.ValueandGlobalCyclicalsvs.Defensives

Exhibit3:FTSE100betatoglobaltradeislowversusothermarkets

Betaofequityreturnstoworldtradegrowthacrossglobalmarkets;datasince1997whereavailable

0.30

0.20

0.10

0.00

-0.10

-0.20

-0.30

-0.50

Cyclical-Value

MIB

Cyclical-Growth

DAX

CAC40

EMChina

FTSE250

TOPIX

FTSE100

Defensive-Growth

Defensive-Value

S&P500

-0.40-0.30-0.20-0.100.000.100.200.300.40

UK

FTSE100

1.3

4.54.03.53.02.52.01.51.00.50.0

BetaofEquityreturnstoWorldtradegrowth(advancedoneyear)

3.5

2.8

1.91.92.02.0

1.61.71.8

US

S&P500

EuroArea

SX5E

France

CAC

Europe

STOXX600

German

DAX

German

MDAX

OMXNordics

Japan

TOPIX

Taiwan

SE

Asia

MXAPJ

1.4

MSCIEM

4.0

Source:Bloomberg,GoldmanSachsGlobalInvestmentResearchSource:Datastream,Worldscope,GoldmanSachsGlobalInvestmentResearch

3.EconomicmomentumshouldbenefitFTSE250andRetailers.RecentmacrodataontheUKhasbeengood:theUKcompositeflashPMIincreasedto53.4,notablyaboveconsensus,onthebackofasizeableimprovementinservicesactivity.GDPexpanded

0.6%qoqin2Q,twicethepaceintheEuroarea.Lookingahead,oureconomists

continuetoexpectUKGDPtoexpandata0.35%qoqrateinQ3andQ4.Moreover,inflationpressuresaregentlyeasing:coreCPIinflationcameinat3.3%yoyinJuly,belowtheJuneprintandbelowconsensusexpectations.

Crucially,servicesinflationmoderatedto5.2%inJuly,belowconsensusandfour-tenthsbelowtheBoE’sforecast.Oureconomistsexpectcoreinflationtodeclinefurthertojustover3%inDecember2024,somewhatbelowthelevelimpliedbytheBoE’sservices

andcoregoodsforecasts.Surveymeasuresofnear-termpricepressurescontinuetomoderate,somuchsothatinflationexpectationsareclosetohistoricalaverages.

Notunrelatedtothis,wehaveseenmeasuresofconsumerconfidencerisetoo.The

_

FTSE250tendstooutperformwhenPMIsareimprovingandespeciallywhenitisabove52/53(territoryweareinnow)(Exhibit4).Andstrongerconsumerconfidencetendsto

berelatedtotheoutperformanceofRetailers(Exhibit5).

2September20243

GoldmanSachs

StrategyEspresso

Exhibit4:FTSE250tendstooutperformwhenPMIsareimproving

FTSE250exInvestmentTrustvs.FTSE100(y/y%Chg)andUKCompositePMI(RHS)

Exhibit5:StrongerconsumerconfidencetendstoberelatedtooutperformanceofRetailers

FTSE350Retailersvs.FTSE350PricePerformance(Indexto100,Jan‘04)and3mrollingGfKUKConsumerConfidence(RHS)

30%20%10%0%

-10%-20%-30%

FTSE250vsFTSE100

000204060810

y/yUKCompositePMI(RHS)

12141618202224

120

65

110

60

100

55

90

50

80

45

70

40

60

50

40

FTSE350Retailersvs.FTSE350

GfKUKConsumerConfidence(RHS)

0406081012141618202224

20

10

0

-10

-20

-30

-40

-50

Source:Datastream,HaverAnalytics,GoldmanSachsGlobalInvestmentResearchSource:Datastream,GoldmanSachsGlobalInvestmentResearch

4.StrongPoundfavoursFTSE250andUKDomestic(GSSTUKDE).ThePoundhasstagedarapidrecoveryalongsideriskyassetsfromitsearlyAugustlosses.UnliketheUKequitymarket,thePoundtendstobeahigh-betacurrencyandGBP/USDisbackabove1.30.Givenoureconomists’viewofgoodglobalgrowthcombinedwith

reasonableUKdomesticeconomicdata,ourFXteamremainconstructiveonGBP.ButthisisaheadwindfortheFTSE100:theindexismeasuredinGBPbutaround

three-quartersofitssalesexposureisoutsidetheUK(mainlyinDollars)andc.50%ofdividendsarepaidtoinvestorsinDollars.So,theFTSE100isaSterlingindexwitha

(largely)Dollarrevenuestream.

Thatsaid,thesensitivityoftheFTSE100tomovesinGBPisnotlikeTopix’ssensitivity

totheYen:theFTSE100tendstoriseevenwhenthePoundisrisingbecausethePoundtendstobearisk-oncurrency(Exhibit6).Bycontrast,theFTSE250hasmoredomesticexposure(c.50%ofsalesareUK)andtendstobenefitmoredirectlyfromastronger

_

currency,andourUKDomesticbasket(GSSTUKDE)tendstobenefitevenmoreclearly(Exhibit7).

2September20244

GoldmanSachs

StrategyEspresso

Exhibit6:FTSE100andFTSE250haverecentlybeenpositivelycorrelatedtoGBP

S&P500vs.GSUSDTWI;EUROSTOXX50vs.EUR/USD;Topixvs.JPY/USD;FTSE100vs.GBP/USDandFTSE250vs.GBP/USD

Exhibit7:UKDomesticstockstendtobenefitmorefromastrongercurrency

RelativepriceperformanceofUKDomestic(GSSTUKDE)vs.FTSE100(indexedto100inJan-2019)andGBP/USD(RHS)

0.80

0.60

0.40

0.20

0.00

-0.20

-0.40

-0.60

-0.80

-1.00

Aug-22

Dec-22

USJapanFTSE100FTSE250

Apr-23Aug-23Dec-23Apr-24Aug-24

140

130

120

110

100

90

80

19

UKDomesticvs.FTSE100GBP/USD(RHS)

GSGBP/USDForecast(RHS)

202122232425

1.50

1.45

1.40

1.35

1.30

1.25

1.20

1.15

1.10

Source:Datastream,STOXX,GoldmanSachsGlobalInvestmentResearchSource:Bloomberg,GoldmanSachsGlobalInvestmentResearch

5.Valuationlowerthanever...UKequitieslookattractive–evenadjustedforsectorexposure,theUKtradesonanextremediscounttotheUS(Exhibit8).Moreover,everysectorintheUKtradesonadiscount,almostallofwhichindouble-digitsandmuch

deeperthanthehistoricalaverage(Exhibit9).

Exhibit8:Evenadjustedforsectorexposure,theUKtradesonanextremediscounttotheUS

UKrelativetoUS12mforwardP/E

Exhibit9:EverysectorintheUKisonadiscount,almostallindouble-digits

UKvs.US12mforwardP/EdiscountandMedianP/Ediscountoverlast

20years

10%

0%

-10%

-20%

-30%

_

-40%

-50%

UKvs.US

UK(withUSsectorsweights)vs.US

101112131415161718192021222324

-80%

Energy

Autos&Parts

Media

-52%

-67%

-76%

10% 0%-10%-20%-30%-40%-50%-60%-70%-80%-90%

TMT

RealEstate

Market

-50%-49%-48%

Financials

Banks

-41%-40%

-24%

-27%

-34%-33%

-38%

BasicResources

Chemicals

Utilities

Cons.Staples

Telecom

Current

Median

Source:Datastream,Worldscope,GoldmanSachsGlobalInvestmentResearchSource:Datastream,Worldscope,GoldmanSachsGlobalInvestmentResearch

6....Andthediscountisnotjustifiedbylowgrowth.GiventhattheUKmarkethasahighshareoflower-growthsectors,itshouldbeonadiscount,butthediscountislargerthanforothermarketscomparedwithitsgrowth(Exhibit10).Also,ifwelookat

individualcompaniesanddividethemintogroupsbasedontop-linegrowthinFY3,wefindthatUScompanies–especiallygrowthstocks–attractamuchhigherpremium

thancompanieswithsimilargrowthinEurope,andespeciallyintheUK(Exhibit11).

2September20245

GoldmanSachs

StrategyEspresso

Exhibit10:TheUKdiscountislargerthanforothermarketscomparedwithitsgrowth

12mfwdP/Eand2024-2026EPSCAGRGrowth

Exhibit11:UScompaniesattractamuchhigherpremiumthan

companieswithsimilargrowthinEurope,andespeciallyintheUK

Median12mfwdP/EandFY3Salesgrowth.FTSE350isexinvestmenttrusts

30

30

12mfwdP/E

27

25

InformationTechnology

CommunicationUS

Services

24

20

21

ConsumerStaples

Industrials

HealthCare

18

RealEstate

Utilities

15

ACWorld

ConsumerDiscretionary

15

JapanAPACexJaterials

10

12

FinancialsEnergy

Europe

FTSE250

FTSE100

9

5

2024-2026EPSCAGRGrowth

0%5%10%15%20%25%

Median12mfwdP/E

S&P500

STOXX

FTSE350

FY3Salesgrowth<0%0%-2%2%-4%4%-6%6%-8%8%-10%>10%

Source:FactSet,GoldmanSachsGlobalInvestmentResearchSource:Datastream,FactSet,GoldmanSachsGlobalInvestmentResearch

7.Domesticinvestors(orlackthereof)aretheissue.Wethinkthelowvaluationis

partlyafunctionofalackofbuyersforUKassets.Theissueisnotthatforeigninvestorsarerefusingto‘buyBritish’(foreigninvestorshaven’tboughtrecently,buttheyarelargeholders,owningapproximatelytwo-thirdsoftheUKmarketcap,Exhibit13).ItisthattheUKequitymarketneedsforeignbidasthereisadearthofhome-grownequityinvesting.

Thishasseveralramifications:corporateswithoutbuyersfortheirstockseetheirequitytradingonalargediscounttonon-UKequity,andtheylookeithertobuybackshares,

taketheircompanyprivate(wherevaluationstendtobehigher),acceptacorporate

buyerorre-listelsewhere.Inaddition,thisleadstoadearthofnewequityissuanceassellersseelowvaluationsandalackofbuyers.Indeed,theonlynetbuyersofUK

equitiesinrecentyearshavebeencorporatesviabuybacks.

Exhibit12:FlowsfortheUKhavebeenmuchweakerthanformanyExhibit13:Foreigninvestorsownapproximatelytwo-thirdsofthe

otherregionsUKmarketcap

Cumulativeflowsinequityfunds(USD,bn)fromglobalinvestorsUKequitymarketownership

_

800

USDbn.

600

400

200

0

EuropeUS

EM

Asia-PacificUK(RHS)

-200

-400

-600

-800

Jan-20Jul-20Jan-21Jul-21Jan-22Jul-22Jan-23Jul-23Jan-24Jul-24

80

60

40

20

0

-20

-40

-60

-80

Foreign(69)%

100%90%80%70%60%50%40%30%20%10%0%

RestoftheWorld

Households

Domestic(31%)

Government

Insurance

Monetary

financial

corporationsand

pensionfunds

Non-financialcorporations

institutions

Otherfinancialintermediaries

94969800020406081012141618202224

Source:EPFR,HaverAnalytics,GoldmanSachsGlobalInvestmentResearchSource:HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

8.Returningmoneytoshareholders/‘goingprivate’increasinglythesolution.

Corporatesthathavebeenhighlycashgenerativeinrecentyearsandthattendtobeinolder/morematureindustrieshavebeenbuyingbackshares.Thisisespeciallytruein

areassuchasTelecoms,EnergyandFinancials,wherevaluationstendtobelowand

2September20246

GoldmanSachs

StrategyEspresso

managementsconsidertheirstocktobeunder-valued.Thelackofdomesticbuyershasmeantaboomincorporatebuybacksand,ontopofalreadyhighdividends,hastakenthetotalshareholderyieldfortheFTSE100to6%,twicethatfortheS&P500(Exhibit14).

PrivateequitybuyingofUKstocksisanothersourceofdemandandthishascontinuedtobestronginrecentyears,whichisunsurprisinggiventhevaluationgapbetween

privateandpublicassets.Asanaside,inthelongertermwethinkthereisagrowing

poolofprivateassetsthatcould(oneday)movetothepublicmarketsif/whenthereismoreinvestmentinUKshares.Basedonthenumberofunicorns,theUKisranked4thintheworld,andhasmoreunicornsthanGermany,France,NetherlandsandSpain

together.

Exhibit14:ThetotalshareholderyieldonFTSE100istwicethatforS&P500

LTMTotalShareholderYield(%)

Exhibit15:ForeignPEactivityhasbeensignificantlylargerthandomesticactivityinrecentyears

PEtarget:UKpubliccompany,dealsize>$100Mn

12

Energy

14%12%10%8%6%4%2%0%

Financials

9

Telecom

7

FTSE100

6

BasicMaterials

6

Cons.Staples

6

Utilities

6

FTSE250

5

STOXX600

5

RealEstate

4

Cons.

Discretionary

S&P500

Technology

Industrials

Dividends

GrossBuybacks

4

3

3

3

Healthcare

2

40

30

20

10

0

-10

-20

-30

-40

GBPBn.

DomesticPEbuyerForeignPEbuyer

ETFs/MutualFundsflows

00020406081012141618202224E

Source:Datastream,FactSet,GoldmanSachsGlobalInvestmentResearchSource:Bloomberg,HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

9.Governmentpolicyturning.ThereareanumberofgovernmentinitiativesthatcouldbenefitUKequities:

nPensionreview:Thenewgovernmenthaslaunchedapensionreviewwhose

_

priorityistoconsolidatethefragmentedpensionindustryintobiggerfunds

(includingtheindividualpensionschemesintheLocalGovernmentPension

Scheme,worth£360bn).Thisismeanttocutcostsandincreaseefficiency,buttheaimisalsoto“furtherpensioninvestmentintoUKassetstoboostgrowthacrossthecountry”.Thiscouldbesignificantbutitwilltaketimebeforeweseeany

results,aswasthecasewiththesaleofUKequitiesbypensionsfundsoverthepast20-30years.

nBritishISA:Thiswasproposedbythepreviousgovernmentalthoughitisunclear

whethertheproposalwillbepursued.Thatsaid,theideaisconsistentwithmuchofthecurrentgovernment’srhetoriconincreasedinvestmentdirectedtoUKassets.

Wewouldviewtheimpactofthisaspositivebutsmall.

nHomebuilding:TheLabourgovernmenthascommittedtobuild1.5millionnew

homes(300k/year)byreformingplanninglaws.OurUKHomebuildersbasket

(GSSBUKHO)wouldbeanobviousbeneficiary;ithasunderperformedsincecentralbanksstartedhikingin2022.Andearningshavenotrecoveredfromthelacklustre

2September20247

GoldmanSachs

StrategyEspresso

housingmarketandtheshortagesinmaterials/labour(Exhibit16).Aturninthe

housingconstructionmarketdrivenbypolicyimpetuscombinedwithratecutsfromtheBoEwouldclearlybesupportive;consensusexpects2026earningsforthese

stockstobe50%above2024,withanEPSCAGRabove20%inthenexttwoyears.Thatsaid,evenwithdemandimproving,highinputcostswilllikelykeeppressureonmargins.

nRelationshipwiththeEU:Thegovernment’sroomformanoeuvreisconstrainedbyitscommitmentnottorejointheEUsinglemarketorcustomsunion,orallow

freedomofmovement.Thatsaid,ithasindicatedthatitwillpursueagreementsonthemutualrecognitionofqualificationsandvisaarrangementsforshort-term

businessvisitors.Thegovernmentalsointendstoseekagreementtoreduceborderchecksonfoodproducts.Whilethesemeasureswouldbehelpful,theyareunlikelytomateriallymitigatetheeconomiccostsofleavingtheEU.ItisworthnotingthatifthegovernmentweretopursuemoreregulatoryalignmentwiththeEU,thiswouldreducecostsforbusinessesandmakeaclosertradedealeasiertoachieve.

Deficitrisks:But,whilethesemeasures/proposalsarepotentiallysupportive,theUKhasalargebudgetdeficit;thepublicspendingauditshowedaforecastoverspendof£22bninFY2024(0.8%ofGDP).Thegovernmenthasstartedtocutcostsbut

ChancellorReeveshasalsoconcededthatthiswillnotbeenough,andshewilltacklethisinherAutumnBudgetonOctober30.

Highertaxes,andspendingcuts,arenottypicallysupportiveofequities.Onepotentialchangewouldbetoraisetherateofcapitalgainstax(CGT).Weseelimitedrisksfromanychangeheregiventhat(i)thetaxissmall(vs.thesizeofthestockmarket),(ii)UKequityislargelyownedbynon-UKtaxpayers,and(iii)youonlypayCGTwhenyousellassets.

Reductioninuncertaintyiskey:Thereductioninuncertainty,nowthatthenew

governmenthasalargemajority,isprobablythemostcriticalpositive,especiallyafter8yearsofpost-referendumpoliticalturmoilandinthecontextofgreaterpolitical

_

uncertaintyelsewhere.ThebigbeneficiariesofreduceduncertaintyonceagaintendtobethemoredomesticslicesoftheUKmarket(Exhibit17).

2September20248

GoldmanSachs

StrategyEspresso

Exhibit16:Earningshavenotrecoveredfromthelacklustrehousingmarketandtheshortagesinmaterials/labour

EPSUKHomeConstruct.andRICSConstruct.Survey:HousingWorkload(%bal)

Exhibit17:ThebigbeneficiariesofreduceduncertaintyonceagaintendtobethemoredomesticslicesoftheUKmarket

CorrelationofindexperformancewithchangesinUKEconomicPolicyUncertaintysince2015

2400

2000

1600

1200

800

400

EPS:UKHomeConstruction

RICSConstruct.MarketSurvey:HousingWorkload

100

80

60

40

20

0

-20

-40

-0.4

UKDomesticBanks(GSSBBKDU)

UKDomestic(GSSTUKDE)

UKHomebuilders(GSSBUKHO)

FTSESmallCaps

FTSE250

FTSE100

-0.3

-0.2

-0.1

0.0

MSCIWorld

0-60

050607080910111213141516171819202122232425

Source:Datastream,HaverAnalytics,GoldmanSachsGlobalInvestmentResearchSource:Datastream,HaverAnalytics,GoldmanSachsGlobalInvestmentResearch

10.Attractivebottom-upideas:WehighlightourTacticalResearchteam’sscreenof

BuyratedUKstockswhereourEquityanalystsholdanabove-consensusviewonFY25Eearnings.TheaverageP/Eofstocksonthislistisc.13x(2025E),whilstofferingac.11%EPSCAGRover2025-27Eonouranalysts’estimates.Theaveragedividendyieldforthesestocksisc.3.5%withselectnames(M&G,ImperialBrands,BT)offering>6%dividendyield.Importantly,ouranalystsforecastscopeforbuybackstofurtherenhancetheshareholderreturnofferforanumberofstocksonthelist(e.g.Rolls-Royce,IAG).

Below,ourTacticalResearchteamspotlightsselectnamesthatoffer1)attractivevaluewithscopeforpositiveconsensusrevisions(BT);2)strongshareholderreturn

potential(Rolls-Royce);3)highdomesticsalesexposure(SSE);and4)exposuretoAI-drivengrowth(LSEG)–allfourofthesestocksalsofeatureonourEuropean

ConvictionList.

Exhibit18:BuyratedUKstockswithscopeforpositiveearnings’revisions

UKListedBuyratedstocks;>€5bnmktcap;withupsideto12mPT;whereGSisaboveconsensusFY25EEPS

GSvs.IBESEPSDividend

MarketcapUpsideto

_

TickerCompanyNameSector(€)mnRatingPTsPE2025EF-G2ElE

BT.LBTGroupTelecoms16,301Buy*110%9.8%6.6x6.4%6.0%

WISEa.LWisePLCTechnology8,925Buy62%11.3%18.8x7.5%0.0%

ICAG.LIAGTransportandInfrastructure