Professional analysts have more time, more data, and better access to companies than most private investors. As such, the wisdom of the City crowd is worth paying attention to — at the end of the day, you’re either going with the pros or going against them when you invest.
Right now, Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US), Prudential (LSE: PRU) (NYSE: PUK.US) and Quindell (LSE: QPP) are among the favoured stocks of professional analysts.
Royal Dutch Shell
The balance of support among City experts is much stronger for Shell than for rival BP. Furthermore, a number of analysts see Shell as attractive in an even wider context.
Credit Suisse, for example, makes Shell its top pick among Europe’s big oil companies, while, following Shell’s half-hear results at the end of last month, Bank of Montreal said,: “We have moved our Top Pick designation in the global oil majors sector from Total to Royal Dutch Shell”.
Credit Suisse described the half-year results as “a royal performance”, and was summing up the general view of bullish analysts when saying Shell’s investment strategy, depth of assets and cash flow generation “will translate into superior shareholder returns”.
The shares trade at 2,499p, giving a current-year forecast P/E of 11, which is appealing when compared with the FTSE 100 long-term average of 14. Shell’s forward dividend yield is also attractive at 4.5% versus the market’s 3.2%.
Prudential
Prudential, the Footsie’s biggest insurer, is another sector heavyweight with strong analyst support: 90% currently rate the company a buy.
Shore Capital said of Prudential’s recent interim results: “This is a particularly impressive performance given the tough forex and political headwinds that the group has had to contend with in the first half of 2014”.
Prudential’s shares have risen pretty strongly since the results. At a current price of 1,449p they trade on a forward P/E of 15 and offer a modest 2.5% prospective dividend income.
Quindell
AIM-listed insurance outsourcing firm Quindell hasn’t recovered from a scathing report by US shorting-selling outfit Gotham City Research back in April. Despite a rebuttal from Quindell and management initiating legal action against Gotham, the shares are currently trading at 164p — down over 70% on their pre-Gotham-report price of 585p.
Quindell has released bullish trading updates through the summer and spectacular first-half revenue and profit numbers just last week. However, the market’s unease since the Gotham report seems only to have been exacerbated by Quindell’s failure to be accepted for a Main Market listing in June and recent problems with a joint-venture with the RAC. Indeed, the fall of the shares and a current-year forecast P/E of just three suggests Quindell has lost the trust of many market participants.
In contrast, the City experts are uniformly bullish on the company. However, we should note that there are only three, and that two of those are Quindell’s own brokers. House brokers, of course, aren’t generally noted for taking a negative line on their paymasters.