Goldman flags UK & European recovery stocks

Equities
Investments

Goldman Sachs is keeping a close eye on which equities could perform well as the UK and European economies head towards post-COVID recovery. Here are some of the bank’s top picks.

Goldman Sachs’ UK &European equities to watch

The current state of play

As reported by CNBC, a fair few stocks are on Goldman’s list, but it’s worth contextualising why they’ve been picked.

Every week, Goldman publishes its “Reopening for Europe report”. It contains analysis across various sectors to gauge how quickly British and European economies are rebounding from historic COVID-related declines.

Included in Goldman’s calculations are metrics such as retail sales, job advertisements and employment numbers, airline ticket sales and flights data, and so on. In its report for the week ending July 30th, the bank noted activity was 20% below pre-pandemic levels – an increase of 2% week-on-week.

In the UK’s case, a lot of factors are at play helping its economy get back on its feet. Lower COVID cases, lower hospitalisations, and the higher level of antibodies in the general public have helped, alongside a near full removal of pandemic restrictions.

Inbound travel is back on the cards too. UK authorities recently removed quarantine requirements for two-jab vaccinated travellers coming from the EU and the US into England. They will still need to take a test before they travel here and get a PCR test on their second day in the country, but other than that, there is no need to quarantine.

We’ve also seen EU services and manufacturing accelerate at the fastest rate for months.

The stocks on Goldman’s radar

Now we know the background, let’s look at the stocks. According to Goldman Sachs’ analysis, the below equities could offer upsides above 20% during this period of economic recovery.

“Looking at domestic categories, some leisure-driven categories are at or above pre-Covid levels (motorway traffic, eating out), while others continue to lag (use of cash, office return), potentially indicative of structural changes,” Goldman’s analysts led by Patrick Creuset stated.

Let’s start with the UK. Hotel and restaurant group Whitbread has been identified as offering 24% upsides. Many British holidaymakers are choosing to take their holidays the old-fashioned way this year by staying in domestic hotspots. Whitbread could be poised to benefit.

Retailer WH Smith could offer 25% upside above its current market price too, according to Goldman, while real estate firm British Land could offer investors 29%.

Moving to the continent, a mixture of stocks across a variety of sectors have been picked out by the investment bank as having high potential.

ACS, the Spanish infrastructure and construction group, is particularly strong. According to Goldman, ACS’ upsides could range as high as 41%. Property development stocks in general have the potential to be hot picks too. Take French shopping centre construction business Unibail-Rodamco-Westfield. They’ve been identified as offering a 35% upside in the current recovery climate.

European food services business also make the list. Those of note include France’s Elior Group and Italian firm Autogrill. The pair have been eyeballed as offering 34% and 23% potential upsides respectively.

Travel stocks on the list included Swiss airport Flughafen Zurich, with a potential 44% upside to Goldman’s 12-month price target, and Airbus, with 27% upside potential.

A separate list of international firms shows a mixture of businesses operating in sectors poised to benefit from a boom in travel. BP, for instance, could offer an upside of 71% against its 12-month price target on stronger oil prices.

Airline engine manufacturer Rolls-Royce could offer an upside of 59%. Low-cost airline easyJet’s potential upside has been forecast at 29%.