A Guide To Selecting UK’s Blue-Chip And Mid-Cap Stocks In The New Year

  • Jan 08, 2020 GMT
  • Team Kalkine
A Guide To Selecting UK’s Blue-Chip And Mid-Cap Stocks In The New Year

All about the Blue Chips

Even though blue chips typically have a subjective definition and it depends on the investor’s viewpoint on whether a stock can be considered a blue-chip or not, based on different factors contributing to this viewpoint. In general parlance, blue-chip stocks are considered to be the Safest Bets. These stocks performance is consistent in nature and typically does not get affected by economic expansions and contractions, because of these factors, investors consider them to be low-risk assets in nature. These stocks are well known and established when it comes to being listed on the stock markets. The company’s that have historically been considered to be Blue Chip, have an easily identifiable brand and operate as household names; whose products can be used in day to day lives. These stocks generally also tend to have a long history of being listed on the top index of their respective stock exchanges. In the UK, the stocks listed on the FTSE 100 index are typically considered as blue-chip stocks. These stocks often have dominant market positions in their respective sectors and provide a stable growth in earnings as well as stable dividend payout.

Outlook for Blue Chips in 2020

The Blue chips in the United Kingdom have shown a consistent performance in 2019, despite the fears and uncertainties of Brexit along with some other Geopolitical tensions, amid the poor global economic year of 2019. As a reflection of the blue-chip stocks, the FTSE 100 index returned 12.42 per cent during the year and ended the year at 7542.44 points. This performance is likely to see an improvement in 2020, especially in case of a deal-based Brexit, which could lead to friction less trade performance by most established companies in the country. Lots of the companies that declared a reduced dividend or did not announce any dividend in the passing year are also expected to better their dividend payout in 2020, while market capitalisation for most blue chip companies is expected to expand during the year, in terms of both, stock prices growth and attracting new capital. This all points towards 2020 being a good investment year for the blue-chip stocks in the UK.

Here we will be discussing two blue-chip stocks, Diageo Plc and Compass Group Plc who among many others have shown better growth prospects in the new year.

Diageo Plc

Diageo Plc (LON: DGE) is a UK based blue-chip and an alcoholic beverages company whose brand portfolio includes some of the world’s best-known alcohol brands across all alcoholic segments, being sold across the world.

DGE Share Price Performance

As on 8th January 2020, at 11:40 A.M Greenwich Mean Time, by the time of writing, Diageo Plc’s share price was reported to have been trading at GBX 3215.00 per share on the LSE, a surge in the price of 0.96 per cent or GBX 30.50 per share, as opposed to the last trading day’s closing price, which was reported at GBX 3184.50 per share. The company’s market capitalisation was reported at GBP 74.528 billion in reference to the current share price.

The beta of the share of Diageo Plc has been reported to be at a value of 1.33. With this, we can conclude that the movement in the price of Diageo Plc share, is more volatile in nature as opposed to the movement of the benchmark index of the stock in the previous twelve months.

Compass Group Plc

Compass Group Plc (LON: CPG) is a Chertsey, the United Kingdom headquartered Travel and Leisure company whose primary business activity is to create dining solutions and provide catering services to its clients across the world. The company also provides support services to healthcare and hospitality industries as well as to the education industry. Apart from these, the company also supports the sports, adventure and leisure tourism spaces as well as defence, offshore and remote location activity conducting sectors.

CPG Share Price Performance

As on 8th January 2020, at 11:45 A.M Greenwich Mean Time, while writing, Compass Group Plc’s share price was reported to have been trading at GBX 1875.00 per share on the LSE, a surge in the value of 0.75 per cent or GBX 14.00 per share, as opposed to the previous day’s closing price, which was reported at GBX 1861.00 per share. The company’s market capitalisation was reported at GBP 29.553 billion in reference to the current share price.

The beta of the share of Compass Group Plc has been reported to be at a value of 0.76. With this, we can conclude that the movement in the price of Compass Group Plc share, is less volatile in nature as opposed to the movement of the benchmark index of the stock in the previous twelve months.

Comparative stock price chart of DGE and CPG

(Source: Thomson Reuters) Daily Chart as on 08-January-20, prior to the closing of the London Stock Exchange

What are Mid Cap stocks?

Like the  blue-chips, there is no formal definition of mid-cap stocks, but from the investment point of view, in the United Kingdom Mid Cap or “Middle Capitalisation” stocks are the companies that are a part of the FTSE 250 Index of the London stock exchange market and whose Market capitalisation falls between Small Capitalisation and Large Capitalisation stocks. These stocks are affected by the business cycle movements, more than the blue-chip stocks, but not as much as the penny stocks, and are often considered to be doing well when the economy is in the expansion phase. In terms of Finances, these companies show a modest growth normally, but in terms of capital gains, these stocks tend to outperform both Blue chips and small-cap stocks. Since they are more volatile than blue chips, there is also a risk of downfall in case of the economy going into contraction phase.

Outlook for Mid Cap stocks in 2020

Considering the performance, the mid-cap companies in 2019, performed markedly well, both on financial terms and in the growth of stock prices. As a reflection of the Mid Cap stocks, the FTSE 250 Index outperformed the other segment, ending the year with a growth of 25.71 per cent at 22,108.29 points. A similar performance is expected out of the mid-cap stocks in 2020 as well, as mid-cap stocks, which are primarily affected by the Economic cycles, are expected to do well, with the certainty and confidence returning to the market as well as banks expected to increase finances after a poor performance on this metrics in 2019.

Here we will be discussing two mid-cap stocks, Homeserve Plc and Man Group Plc who among many others have shown better growth prospects in the new year.

Homeserve Plc

Homeserve Plc (LON: HSV) is a Walsall, the United Kingdom based support services provider, whose primary business activity includes to provide heating equipment. It also engages in the provision of repairing and installation services as well as home emergency services such as electric and plumbing.

HSV Share Price Performance

As on 8th January 2020, at 11:50 A.M Greenwich Mean Time, by the time of writing, Homeserve Plc’s share price was reported to have been trading at GBX 1304.00 per share on the LSE, a surge in the price of 1.40 per cent or GBX 18.00 per share, as opposed to the last trading day’s closing price, which was reported at GBX 1286.00 per share. The company’s market capitalisation was reported at GBP 4.303 billion in reference to the current share price.

The beta of the share of Homeserve Plc has been reported to be at a value of 0.62. With this, we can conclude that the movement in the price of Homeserve Plc share, is less volatile in nature as opposed to the movement of the benchmark index of the stock in the previous twelve months.

Man Group Plc

Man Group Plc (LON: EMG) is a Jersey headquartered Financial services company, that provides various investment and wealth management solutions as well as the delivery of active management portfolio solutions.

EMG Share Price Performance

As on 8th January 2020, at 11:55 A.M Greenwich Mean Time, by the time of writing, Man Group Plc’s share price was reported to have been trading at GBX 155.10 per share on the LSE, a surge in the price of 0.62 per cent or GBX 0.95 per share, as opposed to the last trading day’s closing price, which was reported at GBX 154.15 per share. The company’s market capitalisation was reported at GBP 2.337 billion in reference to the current share price.

The beta of the share of Man Group Plc has been reported to be at a value of 1.33. With this, we can conclude that the movement in the price of Man Group Plc share, is more volatile in nature as opposed to the movement of the benchmark index of the stock in the previous twelve months.

Comparative stock price chart of HSV and EMG

(Source: Thomson Reuters) Daily Chart as on 08-January-20, prior to the closing of the London Stock Exchange

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