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JPMorgan listed a number of global sectors it says have cheap valuations and “overweight” ratings — referring to the industries it expects to outperform over the next six to 12 months. In a July 3 research note to investors, it picked European telecoms as a “cheap” sector that it is overweight on. “The sector is trading on the cheap side of fair value, and is underowned,” its analysts stated. The note included several lists of stocks in a number of baskets. In its European “value” basket, telecoms companies included Vodafone and Nokia , while its European “growth” basket included Dutch firm KPN . “We think this is an opportunity. Telecoms balance sheets have improved materially in the past few years. The sector offers close to 13% FCF [free cash flow] yield, well above the overall market,” the analysts led by Mislav Matejka stated. The bank is also overweight the energy sector and said it “offers cheap valuations currently,” adding that European companies in the sector “continue to show a discount to oil price.” Energy stocks in JPMorgan’s European value basket included Repsol and Siemens Energy , and it included Finnish oil refiner Neste and Norway-based Equinor in its European growth basket. JPMorgan said it expects consumer staples to rebound “given cheaper valuations and potentially better margins outlook in [the second half],” and it is overweight in the sector. Staples in its European value basket included British grocer Tesco and Swiss chocolate company Lindt & Spruengli . The bank also described the U.K. as “record cheap,” stating: “The UK has de-rated strongly since the 2016 Brexit vote and is trading near the lowest forward P/E [price to equity ratio] vs global peers in the last three decades. The UK appears extremely cheap even if one were to exclude Banks and Energy from the calculation.” The bank rated the U.K. overweight. JPMorgan listed several stocks in its JPM UK Exporters basket, including advertising group WPP , liqor company Diageo , health care firms GSK and Smith & Nephew . In the financial sector, its picks included Prudential and Standard Chartered . — CNBC’s Michael Bloom contributed to this report
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