Consumer Discretionary

Report by Willis Welby

Willis Welby remains of the view that the UK has plenty of interesting and growing businesses. IHG features in their latest large cap growth screen - it has great financial productivity and is clearly winning market share. Dollar weakness does not help but the implied to Y3 EBITM ratio is just 84. It is too low. Hilton and Marriott are on 135 and 114, respectively. IHG would make sense GBP20 higher than it is now. Other stocks highlighted include QinetiQ (there is a good fundamental story here alongside some very cautious expectations. Despite a Q2 rerating, the implied to Y3 EBITM ratio is still only 65) and GlobalData (the disposal of part of the Health franchise may prove seminal. Management is talking organic growth >10%, margins drifting higher and accretive roll-ups).

Report by Willis Welby

The Willis Welby team revisits their review of UK growth names they put in place at the start of 2023. They have 104 stocks in their UK coverage with market caps north of USD 2.5bn. Nineteen of them make their screen of consensus Y3 revenue growth in excess of 6%, reasonable financial productivity, and an implied Y3 EBITM ratio of less than 110. The performance of this approach has been okay since May 20, with the mean move of the 18 names at -0.8%, which is ahead of the -2.1% return from the FTSE 350. The team remains of the view that the UK has plenty of interesting and growing businesses. And enough of those names are still available at attractive prices, including the likes of Sage, Convatec and IHG.

Consumer Discretionary

Report by ChartWizard

IHG exemplifies a classic quadrant crossover on the Relative Rotation Graph (RRG), indicating potential relative outperformance vs. the broader markets. Currently, IHG's stock is forming a neutral symmetrical triangle pattern, which usually acts as a continuation pattern. Providing further support, the price is holding steady at the 50-Week Moving Average of 5122. Notably, the stock has entered the leading quadrant on the RRG, reinforcing its potential to outperform. If the expected technical scenario unfolds as anticipated, IHG may reach 5800 levels in the upcoming weeks. However, it is essential to monitor any drop below 5150, as it would invalidate the current technical setup.

Report by Willis Welby

One easy response for equity investors faced with such a radical change in the backdrop for equity pricing this year is to assume that growth stocks can get further derated. Willis Welby, who use expectations analysis to help decode share prices, differentiates between duration stocks which require a transformation in business models and growth stocks which do not. They draw particular attention to IHG, Burberry, Compass, Sage, Auto Trader and Experian. Notable absentees from their analysis are the industrial fan club stocks of Croda, Halma and Spirax which did not make their consensus Y3 revenue growth criteria.