Five UK blue-chips among these 25 best stock ideas
One City analyst has named their favourite European stocks for the year ahead. Graeme Evans reveals who the UK companies are and the rationale for their inclusion.
27th January 2026 15:35
by Graeme Evans from interactive investor
A list of Europe’s 25 best stock ideas includes five entries from the FTSE 100 after AstraZeneca (LSE:AZN), Rolls-Royce Holdings (LSE:RR.), RELX (LSE:REL), Rentokil Initial (LSE:RTO) and Glencore (LSE:GLEN) were backed for outperformance in 2026.
- Invest with ii: Top UK Shares | Share Tips & Ideas | Cashback Offers
The compilation by Bank of America, which also likes TotalEnergies SE (EURONEXT:TTE), Airbus SE (EURONEXT:AIR) and ASML Holding NV (EURONEXT:ASML), Hermes International SA (EURONEXT:RMS) and L'Oreal SA (EURONEXT:OR), picks the stocks with significant business or market-related catalysts.
The inclusion of AstraZeneca as the top choice of the European pharmaceuticals sector reflects its “best-in-class” pipeline and expectations that multiple product launches and catalysts from late-stage clinical trials will drive meaningful sales growth.
The bank recently lifted its price target from 14,500p to 16,500p, which represents a further 20% upside on today’s near record price at 13,798p.
The shares trade on a multiple of 16 times forecast 2027 earnings, whereas the bank believes mid-term guidance for a high single-digit growth in sales supports a re-rating to 19 times.
- Aviva vs Legal & General: analyst names their winner
- Stockwatch: onwards and upwards for this company
- Sector Screener: why Rolls-Royce shares still appeal
On Rolls-Royce, BofA said the current valuation discount to peers Safran SA (EURONEXT:SAF) and MTU Aero Engines AG (XETRA:MTX) will be a key focus for the market in 2026, particularly given that the group appears to be running well ahead of the 2028 guidance of £4.2 billion-£4.5 billion in free cash flow.
The bank said: “We see Rolls delivering more than £5.5 billion in free cash flow in 2030, driven by the acceleration in A350 deliveries, continued progress on flight hour pricing and stabilisation in shop visits from 2026.”
Capital returns will be another important driver as the bank expects Rolls to announce at least a £2 billion buyback with annual results in February.
From 2026 to 2030, it sees the potential for Rolls to return £16 billion via buybacks and £6 billion in dividends while maintaining a £6 billion net cash position by the decade-end.
The bank expects Rolls to trade at a 26 times forecast 2029 free cash flow, which leads to a new price target of 1,615p. This compares with this afternoon’s 1,239.5p and 100p in early 2023.
It added: “We view valuation as attractive versus peers given improving free cash flow generation and the balance sheet provides capital allocation optionality near term. As one of the cheapest civil aerospace assets globally today, we see potential for a strong re-rating in 2026.”
The bank backs a 50%-plus upside for Relx shares to 4,500p, having seen the Elsevier journals and LexisNexis endure one of its toughest years in 2025 due to artificial intelligence (AI) concerns.
It said: “In our view, Relx is a mispriced AI beneficiary, and few companies are as well-placed to deliver such a sea change in sentiment.”
The bank said key AI product innovations, as well as above-consensus growth pick-ups in both the science, technical and medical and legal divisions provided catalysts.
- Tips and tricks on how to generate a sustainable monthly income
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
- Stockwatch: a secure choice for income plus option for growth
The shares have fallen to a 2.5 year low at 2,841p, which the bank said left Relx on a multiple 25% below its peers.
BofA adds that Rentokil Initial is at an attractive entry point, with the scope for re-rating given that there now appears to be more visibility on its Terminix acquisition in North America.
The bank said the company’s North American margin target of at least 20% by 2027 was ambitious but feasible, adding that Rentokil was now gaining momentum through both the integration and its new marketing strategy for the region.
It points out that pest control is a sector with “great resilience” due to the non-discretionary nature of its services. Since 2007, the leading players have consistently grown above GDP at a multiplier of 1.3 times.
The stock has been upgraded from Neutral to Buy, with a price target of 510p that compares with 472p today.
Glencore was among the worst-performing “Big Miner” equities in 2025 but BofA believes the FTSE 100-listed company is well placed to catch up in 2026.
It points out that a run of earnings downgrades due to the lower price of coal is behind the company and that copper has the potential to be the main driver of upgrades. The company also stands out for not being exposed to iron ore, unlike many of its peers.
A recent City presentation by Glencore recently highlighted the miner’s Tier 1 copper assets and growth optionality, while there’s also M&A potential after Rio Tinto Ordinary Shares (LSE:RIO) reopened talks with Glencore about a combination of some or all of their businesses.
The shares have already rallied by more than a fifth this year to 502p but BofA sees further upside to 520p.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.