Stockbrokers urge investors to be cautious during 2012

STOCKBROKERS have urged investors to be cautious in their stock choices this year; expressing doubt that predicted growth across European and US equity markets can actually be achieved and predicting a secondary recession for the eurozone.

Of the houses that have published their annual list of stocks to watch in the coming 12 months, the watchwords are conservatism and caution; and most cautious of all, has been Davy Stockbrokers.

“The euro area sovereign debt crisis has led to a collapse in consumer and business confidence. It’s now likely that the euro area will experience a double-dip recession in 2012,” the company said yesterday.

Regarding forecast growth in equity markets, Davy added: “Consensus estimates for equity markets — in both the US and Europe — are assuming mid-single digit revenue growth and over 10% earnings growth in 2012. This also assumes thatoperating margins reach cycle-high levels. We believe these forecasts are too optimistic and will likely decline during the year.”

Among the Irish stocks Davy is backing this year are Ryanair, Kerry Group, Paddy Power and Glanbia; with the company looking at firms that can achieve top-line growth, in any environment, combined with strong balance sheet and cash flow maintenance.

In its outlook, Dolmen Stockbrokers has identified the likes of Apple and BMW, on the back of signs that consumer spending might pick up in the US; and has talked up pharmaceuticals, exploration and technology stocks. Its basic message is buy safe ‘mega-cap’ stocks (McDonald’s, Coca-Cola, General Electric) and stay away from banking stocks.

While Goodbody Stockbrokers nor NCB Stockbrokers have delivered their outlooks for 2012 as yet, Bloxham Stockbrokers published its guide in the run-up to Christmas.

As well as including the likes of Kerry Group, DCC, FBD Insurance, Paddy Power and Ryanair in its preferred Irish stocks; Bloxham identified Irish companies it would like to see float in Dublin.

“We believe the ISEQ would be embellished materially by the inclusion of progressive Irish companies,” the company said before highlighting five in the form of Glen Dimplex, the Irish Dairy Board, Sisk Group, Avolon and the Dublin Airport Authority.