* Contrarians: a new stock-picking angle to review our European SMC universe
We introduce a new product to complement our European Small & Mid Caps recommendation lists
(Strategic and Tactical) and our innovative weekly SMC Navigator tool. With this new product we
take a novel stock-picking approach: we highlight our deep contrarian calls vs consensus. Taking
both a quantitative and a qualitative approach, we grill our analysts to find out what they see that
the market doesn’t.
* Two contrarian Outperform calls: Faiveley, Vidrala
Our two positive convictions are on Faiveley (new management prioritising backlog execution, US
and China high-speed train opportunities, cheap relative valuation) and Vidrala (stronger FCF and
ROCE, better shareholder remuneration and M&A).
* Four contrarian Underperform calls: Booker, Clariant, EDP Renovaveis, N. Brown
Our Underperform calls are Booker (difficult environment, low earnings visibility for the current
multiple); Clariant (poor FCF generation, challenging 2015 targets, full valuation); EDP Renovaveis
(expensive valuation and weak management track record); and N Brown (new competition).
* We also highlight highly consensual calls which could revert
Overly consensual ideas are always a risk from an investment perspective. We have thus screened
for stocks on which consensus is strong but where several quantitative criteria suggest a potential
turning point for sentiment. Three of our consensual calls with an Outperform rating emerge on this
radar screen: ASM International, CFE and Sorin. Our conviction on these names remains
nevertheless positive.