- 61% of all analysts’ recommendations on FTSE 350 stocks are ‘buys’ entering 2024 and just 6% are ‘sells’
- This makes sense as the UK’s underperformance of its global peers means the market is getting cheaper (in relative and absolute terms)
- Analysts had a good year in 2024: their top picks beat the market (for the second year in a row) and the least popular stocks underperformed for good measure
“As we enter 2025, 59% of all analysts’ recommendations are buys and just 7% are sells for constituents of the FTSE 100, the highest and lowest scores respectively over the past eleven years. For the FTSE 350 index 61% of all recommendations are positive ratings and just 6% negative ones, and the latter figure is again the lowest since 2015,” says AJ Bell investment director Russ Mould.
“Momentum players may feel inclined to stick with US equities and join the herd in running with the so-called ‘Magnificent Seven,’ especially as the strategy worked so well in 2024. Contrarians may instead take to heart American general George S. Patton’s maxim that, “If everybody is thinking alike, then somebody isn’t thinking,” and ponder whether the analysts are on to something as they champion the perennially unloved, and thus potentially undervalued, UK stock market.
Source: LSEG Refinitiv data, Marketscreener, analysts’ consensus, London Stock Exchange. 2025 Data as of 10 January 2025
“Analysts have become progressively more bullish over the past three years.
“Sceptics may counter that the rising percentage of ‘buy’ recommendations and falling percentage of negative ratings is still not translating into the sort of returns that could be gleaned from a tracker or passive fund which delivers the performance of the US equity market, minus the fees and running costs, for example.
“However, it does makes sense, as the FTSE 100 and FTSE 350 continue to lag their global peers and thus become progressively cheaper on a relative basis (and an absolute one, as earnings and dividends continue to grow). The number of takeover approaches for UK-listed firms, with an average bid premium of 45% in 2024, also suggests that someone is paying attention to the value on offer in the UK, be they trade buyers or private-equity firms.
“One way to assess whether it is best to follow the stock-pickers or stick with a tracker (or an actively managed fund) may be to study the efficacy of analysts’ stock recommendations over time and back-test the results.
“The bad news is the analysts’ top picks failed to beat the FTSE 100 index in 2015, 2016, 2017, 2018, 2020, 2021 and 2022, despite all of their diligence. However, they have done so for two years running in 2023 and 2024, to repeat the success of 2019. Thumping gains from Beazley, 3i and Intermediate Capital helped the ten most-popular stocks, as ranked by the percentage of ‘buy’ or ‘outperform’ ratings attributed to them compared to the total number of recommendations, to generate a total return of 12%, and thus beat the 9.7% provided by the FTSE 100 itself.
“This suggests there may be some truth in the idea that the huge flows of money into passive instruments such as exchange-traded funds (ETFs) mean there are opportunities for skilled stock-pickers.
“The ten least popular stocks, defined by the percentage of ‘sell’ ratings attributed to them compared to the total number of hold or buy recommendations, underperformed the FTSE 100 to complete a welcome double for the analysts’ community.
“These ten names generated a negative total return of 5.2% in 2024, to comfortably undershoot the 9.7% positive total return offered by the FTSE 100. Ocado, Spirax, Sainsbury and Antofagasta all provided negative returns and eight of the ten underperformed the index, as only Unilever and Sage managed to defy the doubters.
“It is easy to poke fun at analysts, not least because picking individual stocks is hard, even if it is your full-time job. Markets will tend to do what causes the greatest degree of surprise and analysts do not intentionally set out to sit on the fence. Their views and research shape the debate and help to form opinion, but markets will price in what is the prevailing consensus pretty quickly. What analysts try to do, and investors must do, is assess what the possible upside and downside surprises to the consensus could be, which is more likely, and what the impact upon a stock could be. Only then can risk and reward be properly measured.
“At least 2024’s results give credence to the case that analysts’ research can provide some genuine added value.
Source: LSEG Refinitiv data, Marketscreener, analysts’ consensus, London Stock Exchange. 2025 Data as of 10 January 2025
“Analysts will take a little less satisfaction from how their labours worked out across the FTSE 350. When it came to the broader index, the most popular selections marginally underperformed the index, and even if the least popular ones lagged by a greater margin, they did not provide a negative total return overall.
“A huge success with silver miner Hochschild helped to boost the bulls, while a bid for Hargreaves Lansdown tilted results against the bearish picks, to highlight how unloved, unpopular stocks can look temptingly cheap in the eyes of someone else.
Source: LSEG Refinitiv data, Marketscreener, analysts’ consensus, London Stock Exchange. 2025 Data as of 10 January 2025
“The ultimate conclusion still probably has to be that broker research needs to be treated with a degree of caution (assuming that investors can get their hands on it in the first place), certainly in the cases where stocks seem universally popular.
“Anyone prepared to pick their own stocks rather than pay a fund manager or index-tracker fund to do it for them simply must do their own research on individual companies before they even think about buying or selling any of its shares.
“In sum, Warren Buffett (still) seems spot on with his observation that, “you cannot buy what is popular and do well.”
“The stunning performance of the Magnificent Seven in America will put that to the test once more in 2025 and, closer to home, investors might like to know which stocks are most liked – and disliked – by analysts at the start of 2025.
“The two tables below list the names which investors may wish to analyse in greater depth, or simply avoid altogether, depending upon their view of the value of the research provided.”
Source: LSEG Refinitiv data, Marketscreener, analysts’ consensus, London Stock Exchange. 2025 Data as of 10 January 2025.
Source: LSEG Refinitiv data, Marketscreener, analysts’ consensus, London Stock Exchange. 2025 Data as of 10 January 2025.
