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Top and bottom FTSE 100 firms rated strong buys and sells

By Jenni Reid

18:07, 22 February 2022

Reckitt Benckiser (RKT) building in Mechanicsburg, Pennsylvania
Reckitt Benckiser (RKT) was among the top four FTSE 100 performers over the past week showing a 'strong buy' signal – Photo: Kristoffer Tripplaar / Alamy Stock Photo

The gradual release of UK companies’ 2021 financial results is giving analysts fresh takes on their prospects and providing investors with a wealth of new data on which to base their decision-making.

Another tool at their disposal is technical analysis – the use of past price movements, volume, moving averages and other data to predict future market performance.

We’ve compiled the top four performers from the FTSE 100 over the past week which are showing a ‘strong buy’ signal based on technical analysis (using data from investing.com, and prices at before the open on 22 February); followed by the worst four performers showing a ‘strong sell’ signal, to see what’s happening at those companies.

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The strong buys

1. Reckitt Benckiser

Consumer goods multinational Reckitt Benckiser (RKT) leads the list with a 7.6% share price improvement. The maker of products under brands including Air Wick, Clearasil and Woolite reported full-year 2021 results on 17 February which showed revenue falling ​​5.4% to £13.2bn on an actual basis (though up 3.5% on a like-for-like basis) and an overall operating loss of £804m – so why the rising stock price?

Chief executive Laxman Narasimhan, who took the role in 2019 and set it on a turnaround programme, said the company is continuing its growth after an exceptional 2020. It will target higher revenue and margins in 2022 despite inflation through price rises, business savings and product adjustments. Last year it ditched two brands, including Scholl, with lower-than-average margins, and it is currently £1.1bn through a £2bn cost-cutting programme. Revenue in its healthcare division rose 17.5% in the fourth quarter of the year.

Danni Hewson, financial analyst at AJ Bell, believes Reckitt brands – which also include Dettol, Finish, Cillit Bang, Calgon, Durex and Gaviscon – may provide a safe haven from the inflationary pressure on consumer goods, as customers remain willing to pay for known brands for healthcare and cleaning products. Meanwhile, JP Morgan analyst Celine Pannuti said the company’s “reassuring 2022 outlook should not only be supportive today but also puts the turnaround story on fast track”.

2. Standard Chartered

London-based bank Standard Chartered (STAN) was up 3.6%. It missed analyst revenue expectations in full-year 2021 results, with underlying operating income of $14.7bn down 1% on a constant currency basis. This was blamed on a fall in net interest income and flat income in areas like fees.

However, its pre-tax profit was up 61% to $3.9bn due to lower credit impairment charges. Its return on tangible equity increased 300 basis points to 6% due to the increase in profits, and it said it is planning a return on tangible equity of 10% by 2024.

“The group set out an ambitious set of targets for the next couple of years, which will involve doubling down on shareholder returns as well as investing in higher growth areas of the business; China, in particular, is earmarked for special attention,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

“Standard Chartered enjoys the benefits of having multiple extra revenue streams, in the form of substantial trading and corporate banking arms. That’s a luxury the likes of Lloyds simply don’t have and makes the Asian specialist a leveraged play on wider markets. As the world starts to emerge properly from Covid, that may well be no bad place to be.”

3. AstraZeneca

Drugmaker AstraZeneca (AZN) was up 3.2%. Its full-year results on 10 February showed full-year revenue up 38% at constant exchange rates to $37.4bn, including revenue from its Covid-19 vaccine, and up 23% to $33.4bn without it. However, its cash profits were down 6% to $7.6bn, in part due to $2.2bn of costs related to the acquisition of disease specialist Alexion Pharmaceuticals. It forecast full-year 2022 revenue growth in the high-teens and core earnings-per-share growth in the mid-to-high twenties.

Laura Hoy, equity analyst at Hargreaves Lansdown, commented: “The group’s obligation to keep the cost of vaccines low is starting to dwindle as global demand fades. Management is expecting Evusheld, a monoclonal antibody treatment, to make up a greater proportion of sales going forward. This will boost profitability for the Covid division, though margins won’t reach the same 60%+ levels the rest of the company enjoys.

“The real driver for Astra’s profit decline was the Alexion acquisition. The purchase brought Rare Diseases under the Astra umbrella and our first glimpse at performance for this sector wasn’t too shabby. There’s a lot riding on the successful integration of Alexion…net debt more than doubled in the wake of the acquisition and as interest rates rise, AZN will need sufficient cashflow to pay it down.”

4. SSE

The final Strong Buy on our list, Scottish energy and broadband supplier SSE, was up 2.7%. In a trading statement released 8 February, it upgraded its full-year 2021–2022 adjusted earnings per share guidance from 83p to 90p. It attributed this to the “strength and stability” of its “balanced mix of regulated and market-facing businesses” – potentially a response to hedge fund Elliott Management’s call to break up the company. It also cited good financial performance from its flexible thermal and hydro plant, which it said is more than offsetting lower than planned renewables output.

GME

25.24 Price
+0.800% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.15

AMD

154.85 Price
+2.220% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.25

TSLA

251.95 Price
+5.330% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.17

NVDA

123.64 Price
+4.730% 1D Chg, %
Long position overnight fee -0.0263%
Short position overnight fee 0.0041%
Overnight fee time 21:00 (UTC)
Spread 0.14

Analysts at both Barclays and Morgan Stanley have reiterated Overweight ratings on the stock this month.

The strong sells

1. Evraz

Steel manufacturing and mining firm Evraz (EVR) has plunged more than 50% this year and 19.2% over the last week. That decline is on fears that the Russia-Ukraine conflict could hinder business – since it has significant operations in both countries – along with the demerger of its coking coal business, in an environment-minded move.

In a recent fourth-quarter 2021 trading update, the group said production output was mixed by sector – down year-on-year for crude steel, and up for raw coking coal, iron ore and vanadium. Annual results are due on 25 February.

2. Scottish Mortgage Investment Trust

Investment firm Scottish Mortgage (SMT) has been another big faller in 2022 and is down 24.51% in the year to date – though it is still well above its pre-pandemic level. Analysts interviewed by Yahoo Finance have suggested this may be due to the impact of rising interest rates on its portfolio which is heavily exposed to tech and growth stocks.

Analysis by The Motley Fool found the company’s 10 biggest investments are ​​trading on an average of 35 times forecast earnings, with expected earnings growth of 14% over the next 12 months – suggesting neither the holdings nor Scottish Mortgage, appear cheap right now.

Peter Hewitt, manager of the BMO Managed Portfolio, recently told The Telegraph that while the start of the year may see a loss, these types of trusts have the potential for big, long-term gains, depending on where they are invested.

3. Aveva

Cambridge-based IT consultancy Aveva (AVV) is down 10% over the last week. In results released 17 February, the firm reported a significant slowdown in revenue and profit, as the pandemic-fuelled boom in demand for its services slowed down.

However, chairman Philip Aiken said it was a year of “strong progress” despite challenges. The firm has signed a long-term partnership with French electric utility EDF to work on its 3D nuclear engineering program and wants to focus on growing its software-as-a-service offering.

Meanwhile, analysts at Berenberg gave the stock a Buy rating last week on its acquisition of software company OSIsoft, which it said would be "financially transformational" and boost its growth potential.

4. IAG

Owner of British Airways, Iberia and Aer Lingus, International Consolidated Airlines Group (IAG) was down 7.9%.

That’s despite the reignition of hopes it had passed through the worst of the Covid-19 storm. Peel Hunt analyst Alex Paterson said last month that pent-up demand should be able to absorb cost increases for the group, including higher oil, airport and carbon prices, though rated it a Hold.

Its full-year results are out on 25 February but are likely to show a significant loss following its nine-month update revealing a loss of €2.5bn.

Markets in this article

AZNs
AstraZeneca - SEK
1702.9 USD
26 +1.560%
UK100
UK 100
8220.6 USD
50.2 +0.610%
IAG
IAG - GBP
1.6440 USD
-0.068 -4.010%
RB.
Reckitt Benckiser Group
44.45 USD
0.52 +1.190%
SMT
SCOTTISH MORTGAGE INVESTMENT TR
8.806 USD
0.129 +1.500%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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