Citi thinks investors should take another look at the ‘Anti UK8’

LONDON – Citi is advising investors to take another look at domestic UK stocks that have suffered since the Brexit vote, saying there could be value in the group it has dubbed the “Anti UK8”.

In a note sent to clients last week, analysts identify eight large domestic UK stocks that have suffered since the vote and could be undervalued: Marks & Spencer, BT, Lloyds, British Land, ITV, Legal & General, Persimmon, and Costa Coffee and Premier Inn owner Whitbread.

Citi writes: “These stocks, in aggregate, have been sharply de-rated in the last year and now trade on a 20% dividend yield premium to the market. When taking into account the DY premium of Oil & Banks, value investors may want to take a closer look at some of these stocks.”

The term “Anti UK8” is in reference to Citi’s earlier group of UK8 stocks – eight companies it identified ahead of the Brexit referendum that it thought were good hedges against a “Leave” vote.

But the investment bank says that not all UK stocks are equal. While the FTSE 250, which is mostly made up of domestic companies, has also de-rated since the vote to leave the European Union, Citi’s analysts write: “We still find it hard to get too excited about UK mid-caps, in aggregate, at these levels given the backdrop of UK macro uncertainty and weak GBP trends.”