Achtung!

Deutsche Bank. On top of the geopolitical and economic events on the horizon, banks remain a key cog in the wheel that turns financial markets, particularly in Europe. After the US Department of Justice announced a fine for DB of $14bn for the mis-selling of mortgage-backed securities, worries have grown over its capacity to pay the fine. The obvious contagion for the rest of the global banking sector is a concern. However, with suggestions of a reduction in the fine from the DoJ and rumours of the German Government already drawing up a DB contingency plan (should the worst case scenario emerge), investors’ minds should be put at ease that a repeat of Lehman Brothers will not be allowed to take place.

Winners and Losers Post-Brexit

The EU referendum has been dominant in providing direction for financial markets in Q3, so much so that we have made the decision to provide an analysis of share price performance since reaching Brexit lows in the table below.

Source: Bloomberg

Among the list of outperformers includes life insurance providers (STJ & AV.), alongside strongly performing mining stocks (AAL & GLEN), all of whom are performing above pre-referendum levels. Housebuilders (BDEV & PSN), also enjoyed an impressive bounce, although are yet to regain their positions on the Thursday before the referendum result.   

An honourable mention outside of the top 10 must go to Fresnillo (FRES), currently enjoying the best performance on the UK 100 when compared to its pre-Brexit level on June 23^rd.

At the very bottom of the list are a host of defensive, cyclical and utilities companies largely unaffected by the vote, and the majority have since seen share price performance prove underwhelming in comparison with the greatest bouncers. All of these companies are trading within 10% of their pre-Brexit levels, however notable exceptions BT Group (BT.A) and Pearson (PSON) are still suffering from long-term downtrends, while easyJet (EZJ) has to cope with  the prospect of a lack of demand for short haul flights as a result of the referendum.

Does this suggest that some of these companies are primed to reward opportunistic investors who spy a bargain?

Christmas Come Early?

With all of this in mind, the following pages detail the 10 stocks that we believe will outperform the market in the coming quarter.

Continuing with the cautious theme from our suggestions for Q3, we have chosen a mix of consistent blue chip performers on the UK 100 . With a choice of defensive utility, energy, retail and mining stocks, with the aim to put you in the position to benefit from any outcome of the key events listed above.