After an average total return of 43% for 2019, this team of analysts share their growth picks for 2020.
In addition, well-known names including fast-fashion rivals ASOS (LSE:ASC) and Boohoo (LSE:BOO), housebuilder Bovis Homes (LSE:VTY) and paving firm Marshalls (LSE:MSLH) are on the list despite strong showings in 2019.
Peel Hunt's 35 growth picks for 2020 include 16 it also chose last year, when the broker delivered an average total return of 43% compared with 17% from the FTSE 100 index and 19% from the FTSE All Share.
In total, 22 of the 34 growth picks from 2019 outperformed the market with the best being media company Future after growth of 203% in the wake of recent US expansion. Three others more than doubled returns, with JD Sports up 141%, Learning Technologies ahead 107% and Games Workshop 108% higher.
Peel Hunt's analysts are also much more optimistic than they were this time last year, given that the UK's political outlook appears clearer following December's general election.
This has resulted in five retail stocks featuring on the list, with the most noteworthy being JD Sports amid further progress in the United States on the back of the acquisition of Finish Line in 2018. A flagship JD Sports store is also due to open in New York later this year.
Recent figures for JD in the UK beat even the highest expectations, with like-for-like sales up 7% as shoppers continue to benefit from the company's close relationships with suppliers.
The shares now trade on a forecast price/earnings (PE) multiple of 25 times, but analyst Jonathan Pritchard think there's further to go. He has a target price of 900p, adding:
“The current multiples reflect an excellent equity story, and the forecast momentum on offer.”
Source: TradingView Past performance is not a guide to future performance
It's a similar story at homewares business Dunelm, which is trading on a PE of 21x after a sharp re-rating in recent weeks due to a strong pre-Christmas trading update.
But with Dunelm's new web platform now operational, Peel Hunt sees potential upside to short and medium-term forecasts as the retailer continues to improve spend per customer and makes inroads into new product categories such as furniture.
Dunelm remains highly cash generative, with the return of surplus cash to shareholders via special dividends leading to an attractive yield of 5%. Peel Hunt has a target price of 1,250p, which would represent another record high for the stock.
AIM-listed Boohoo is another retailer on list, despite its shares now trading at a significant premium to both ASOS and German peer Zalando.
Analyst John Stevenson thinks short-term forecasts are “eminently beatable” as both NastyGal and the original Boohoo brand continue to outstrip market expectations.
“The successful launch of Karen Millen and Coast demonstrates Boohoo's ability to tap into a different demographic and price proposition, raising the prospect of significant growth potential ahead.”
Shares are seen as a “buy” with a 350p price target.
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Stevenson is also upbeat on ASOS, which has been showing signs of getting back on track after difficulties with its warehouse operations in the United States.
“We expect to see the large efforts to re-activate lapsed shoppers and drive revenues resulting in improved customer KPIs (key performance indicators) and an accelerating top line.”
With a target price of 4,000p, Stevenson sees potential for a sharp recovery in pre-tax profits over the next two to three years. He added: “At the heart of the ASOS investment case remains a tremendous opportunity to take market share as online shopping continues to disrupt incumbents.”
In other sectors, Peel Hunt has identified a big upside in the share price of Boku (LSE:BOKU), whose platform is used by the likes of Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) to enable consumers to make purchases through their mobile phone bill.
A move into the mobile identity space is taking longer than expected, but Peel Hunt thinks this still doesn't justify a 30% share price discount to peers. The broker, whose price target of 245p is an upside of more than 150%, expects the company to deliver at least 30% underlying earnings growth in 2020.
The smallest stock on the list is Loungers, whose margin growing potential is described by Peel Hunt as among the best of the listed leisure companies. It is also generating sector-leading like-for-like sales from around 150 sites under the Lounge and Cosy Club brands.
Analyst Douglas Jack has a target price of 285p, compared with 224p today. He added: Loungers' shares have started to reflect the company's excellent progress. In our view, there is more to look forward to.”
The other stocks on Peel Hunt's growth list are 4imprint (LSE:FOUR), Abcam (LSE:ABC), Atalaya Mining (LSE:ATYM), Avon Rubber (LSE:AVON), Brooks Macdonald (LSE:BRK), discoverIE (LSE:DSCV), GB Group (LSE:GBG), Genus (LSE:GNS), Gulf Keystone Petroleum (LSE:GKP), Harworth (LSE:HWG), Homeserve (LSE:HSV), Kenmare Resources (LSE:KMR), Manolete Partners (LSE:MANO), Next Fifteen (LSE:NFC), Paragon Banking Group (LSE:PAG), Restore (LSE:RST), Serica Energy (LSE:SQZ), Sirius Real Estate (LSE:SRE), Tharisa (LSE:THS), Volution (LSE:FAN), Watkin Jones (LSE:WJG), WH Smith (LSE:SMWH) and Zotefoams (LSE:ZTF).
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