Direct Line Insurance Group (DLG)

As a potential Q4 US interest rate rise gets ready to churn up the global financial markets, there are in fact one or two entire sectors that stand to benefit from this. Banks and insurance companies are in that club, and we’re thinking that given the regulatory storm clouds that continue to overshadow the banking sector, it could pay off to consider an insurance company in our Q4 basket. While life insurance companies are seriously long term investors (think decades), the shorter-dated bonds that the non-life subsector prefers will be higher yielding more quickly. There’s no indication as yet that Direct Line’s 2-year uptrend is faltering and we’ve not even seen rates go up yet, but growing expectations mean we may not be the only ones making this observation now.

Will shares continue upwards as the US Fed gets more hawkish? Or is Direct Line now overbought?

Broker Consensus: 57% Buy, 33% Hold, 10% Sell

Most Bullish:   Barclays, Overweight, Target 416p, +13%

Consensus:                                                Target 296p, -2%

Most Bearish:                 Liberum, sell, Target 650p, -19%

NB: All pricing and consensus data from Bloomberg on 28 Sept; Consensus breakdown available on request 

WPP (WPP)

When Sir Martin Sorrell was looking for a basket in which to amass a portfolio of worldwide marketing and advertising companies, who would have thought it’d be actual shopping basket manufacturer Wire & Plastic Products PLC? The rest is history. WPP has its fingers in advertising, lobbying, PR, media investment, research and consulting, while we found no evidence to suggest that Sorrell is still in the basket weaving business. You may never have heard of WPP, but consider the market-moving power that research subsidiary Kantar Worldpanel has when it puts out its notes on UK supermarkets and you’ll have some idea of its influence. Shares are currently trading 18% from highs – will they make it back there on lucrative advertising contracts in the run up to Christmas (it comes earlier every year…)?

WPP, daily chart (closing prices)

Will shares bounce back up and re-test highs of 1600p? Or will they pull back below support at 1300p?

Broker Consensus: 66% Buy, 31% Hold, 3% Sell

Most Bullish:               SocGen, Buy, Target 2035p, +53%

Consensus:                                           Target 1620p, +22%

Most Bearish:  Pivotal Research, Sell, Target 1160p, -13%

NB: All pricing and consensus data from Bloomberg on 28 Sept; Consensus breakdown available on request 

“Direct Line Insurance is just 2.2% from its own 2015 high, is up 8% since the UK 100 commenced its downtrend in late April and has rebounded 5% from the 24 August sell-off”

ITV (ITV)

After ITV boss Adam Crozier praised the BBC earlier in the year, it was recently the BBC’s turn to point rugby fans towards ITV in an apparent admission it’s unable to compete in sports bidding wars with the commercial channels. But the BBC is being encouraged by many to stop trying to compete, letting commercial providers have all the dross that most people love (X Factor). We remain confident ITV can deliver following a change to government legislation that would mean tens of millions of pounds a year in payments from Virgin Media for showing ITV on its cable network, X factor being in full swing with its almost disgustingly rotund advertising revenues and, on the subject of indulgence, Christmas just round the corner.

Will shares bounce back to 2015 highs 280p and above? Or will they break down towards lows of 170p?

Broker Consensus: 61% Buy, 29% Hold, 10% Sell

Most Bullish:     Liberum, Buy, Target 330p, +37%

Consensus:                                   Target 290p, +21%

Most Bearish:  Berenberg, Sell, Target 194p, -19%

NB: All pricing and consensus data from Bloomberg on 28 Sept; Consensus breakdown available on request