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Expert View special: 10 stock picks for 2014

Here are 10 stocks Numis is tipping for the year ahead: five large-caps and five small-caps.

In a special edition of The Expert View, we're taking a look at 10 of Numis's top picks for the year ahead. The first five are large-caps, and the rest are all drawn from the small-cap space.

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Key stats
Market capitalisation£126,103m
No. of shares out18,749m
No. of shares floating18,702m
No. of common shareholdersnot stated
No. of employees260591
Trading volume (10 day avg.)18m
Turnover34,669m USD
Profit before tax8,226m USD
Earnings per share0.45 USD
Cashflow per share0.59 USD
Cash per share4.93 USD

*Correct as at 3 Dec 2013

HSBC: geographical diversity and balance sheet strength

The first of the large-caps to grace the Numis analysts' list is banking giant HSBC (HSBA.L), which they rate an 'add'.

'We would highlight geographic diversity; improving profitability; positive gearing to rising interest rates; and a premium rating warranted for management and balance sheet strength,' the analysts said.

'Advanced economies are strengthening, with many emerging economies' growth rates coming off cyclical peaks. Whether this slower growth is cyclical or structural, we believe HSBC's diversity positions it well.'

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Key stats
Market capitalisation£3,061m
No. of shares out131m
No. of shares floating122m
No. of common shareholdersnot stated
No. of employees1326
Trading volume (10 day avg.)0m
Turnover£1,373m
Profit before tax£210m
Earnings per share140.36p
Cashflow per share141.57p
Cash per share50.89p

*Correct as at 3 Dec 2013

Berkeley Group: laying the foundations for growth

Property developer Berkeley Group (BKG.L) is well placed to grow, and not just in the short term, according to Numis.

'In the past few years Berkeley has laid the foundations for short term growth and long-term cash generation,' the analysts said, reiterating their 'add' recommendation.

'Whilst this is forecast to lead to strong profit growth in the short term, we feel that current forecasts do not adequately capture the strength of the London & South East market plus management actions which should lead to profit upgrades and the potential to accelerate the planned cash return to shareholders.'

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Key stats
Market capitalisation£6,139m
No. of shares out1,640m
No. of shares floating1,629m
No. of common shareholdersnot stated
No. of employees40335
Trading volume (10 day avg.)3m
Turnover£6,510m
Profit before tax£465m
Earnings per share29.00p
Cashflow per share47.15p
Cash per share11.09p

*Correct as at 3 Dec 2013

GKN: margins set to rise

Engineering business GKN (GKN.L) stands to gain from rising sales volumes and expanding margins, according to Numis, which has a 'buy' recommendation on the shares.

'GKN has good market positions in its activities and, particularly in aerospace, is set to benefit from the growth in end markets,' the analysts said.

'Leverage from volume expansion combined with increased operational focus on returns over growth should see an expansion in group margin and profits.'

This, in turn, should lead to higher cash generation. The shares trade at a 17% discount to the wider sector, the analysts added.

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Key stats
Market capitalisation£4,481m
No. of shares out598m
No. of shares floating218m
No. of common shareholdersnot stated
No. of employees14076
Trading volume (10 day avg.)0m
Turnover£2,186m
Profit before tax£152m
Earnings per share24.42p
Cashflow per share32.90p
Cash per share24.63p

*Correct as at 3 Dec 2013

Sports Direct: impressive own brands

Sports Direct (SPD.L)'s own-brand ranges hold the key to stronger margins in a cut-throat part of the retail marker, according to Numis, which rates the shares an 'add'.

'A sports retail model that works: The success of Sports Direct is founded on a unique combination of scale, logistics capability, a trading mentality and, probably most important of all, an impressive stable of acquired own-brands which augment the low margin earned on Nike and Adidas product,' the analysts said.

'This allows Sports Direct to offer the lowest prices but still make a 40%+ gross margin and, in a notoriously low margin sector, a 10%+ operating margin.'

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Key stats
Market capitalisation£3,365m
No. of shares out867m
No. of shares floating864m
No. of common shareholdersnot stated
No. of employees16883
Trading volume (10 day avg.)4m
Turnover£1,277m
Profit before tax£190m
Earnings per share24.66p
Cashflow per share36.34p
Cash per share21.49p

*Correct as at 3 Dec 2013

William Hill: a good bet following downgrades

William Hill (WMH.L)'s significant investment over the past year will start to pay off next year, Numis reckons, backing the shares with a 'buy' recommendation.

The analysts acknowledged that William Hill probably overpaid to acquire the part of its online operation it didn't already own, as well as for its businesses in Australia.

'However, these investments increase its exposure to faster-growing online business and provides the group with a much enhanced platform with which to exploit medium term growth opportunities,' the analysts said.

'A poor run of sporting results has undermined profitability and the share price. But this is not a structural issue and, in our view, it has created a buying opportunity. We reiterate our BUY recommendation and retain our 550p price target.'

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Key stats
Market capitalisation£85m
No. of shares out252m
No. of shares floating241m
No. of common shareholdersnot stated
No. of employeesnot stated
Trading volume (10 day avg.)0m
Turnover0m USD
Profit before tax-4m USD
Earnings per share-0.03 USD
Cashflow per share-0.03 USD
Cash per share0.22 USD

*Correct as at 3 Dec 2013

Aureus Mining: Liberian gold potential

The first of the small-caps on the Numis list, Aureus Mining (AUE.L) is a 'buy' for the analysts as it gears up to produce its first ounce of gold.

'Aureus is firmly on the way to becoming a African junior gold producer with financing complete and development started. Aureus has used its first mover advantage successfully to define a robust, low cost and high grade project with attractive exploration upside,' the analysts said.

'We believe the quality of the management team and assets will ultimately lead to the establishment of profitable production, an attractive prospect in a volatile gold market.'

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Key stats
Market capitalisation£1,270m
No. of shares out521m
No. of shares floating491m
No. of common shareholdersnot stated
No. of employees840
Trading volume (10 day avg.)1m
Turnover969m USD
Profit before tax131m USD
Earnings per share0.25 USD
Cashflow per share0.27 USD
Cash per share0.41 USD

*Correct as at 3 Dec 2013

Beazley: superior margin resilience

Insurance specialist Beazley (BEZ.L) justifies its premium valuation, Numis says, and they back the shares with a 'buy' recommendation.

'Having been unexpectedly flat in Q2, premium income growth in Q3 was +4% year-on-year, mainly driven by political risk and contingency but also with modest growth in reinsurance,' the analysts noted.

'In our view, part of the positive claims trends noted in Q3 have positive implications for future margins, particularly in Specialty. We see material share price upside given the low FY14 price to earnings ratio of 8.9x.'

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Key stats
Market capitalisation£174m
No. of shares out116m
No. of shares floating98m
No. of common shareholdersnot stated
No. of employees90
Trading volume (10 day avg.)0m
Turnover£8m
Profit before tax£-10m
Earnings per share-11.47p
Cashflow per share-10.18p
Cash per share10.34p

*Correct as at 3 Dec 2013

Velocys: progress in Thailand

Synthetic fuels specialist Velocys (VLS.L) is on track to commercialise its technology, according to Numis, which rates the shares a 'buy'.

'Velocys has announced a commercial agreement for the deployment of the company's gas to liquids technology for PTT, the national energy company of Thailand,' the analysts noted.

'The economics of modular GTL remains robust giving us confidence in the underlying investment case. We see potential for further engineering study announcements before year end positioning Velocys for its first commercial scale order in 2014.'

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Key stats
Market capitalisation£476m
No. of shares out388m
No. of shares floating277m
No. of common shareholdersnot stated
No. of employees5403
Trading volume (10 day avg.)0m
Turnover£2,057m
Profit before tax£27m
Earnings per share6.83p
Cashflow per share9.00p
Cash per share2.24p

*Correct as at 3 Dec 2013

Lookers: plenty more left in the tank

Car dealership Lookers (LOOK.L) looks undervalued to Numis, which rates the shares an 'add'.

'Forecast momentum has been positive and assumptions behind earnings estimates still appear conservative,' they said.

'The strong liquidity and proven selective approach to deals suggest that further accretive bolt-on acquisitions are likely in a consolidating market. On a 20% price to earnings discount to the sector, we would continue to Add to holdings.'

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Key stats
Market capitalisation£782m
No. of shares out38m
No. of shares floating34m
No. of common shareholdersnot stated
No. of employees1767
Trading volume (10 day avg.)0m
Turnover£279m
Profit before tax£30m
Earnings per share80.90p
Cashflow per share176.55p
Cash per share194.03p

*Correct as at 3 Dec 2013

Fidessa: improving outlook for equities

Financial markets software specialist Fidessa Group (FDSA.L) is set to gain as appetite for equities continues to grow, Numis says, backing the shares with a 'buy' stance.

'We remain of the view that a) the equities trading backdrop is improving, thus on a twelve month view we will have visibility of improving revenue trends; and b) new analysis that suggests there is a material margin impact from the investment in derivatives,' the analysts said.

Numis has split the equities and derivatives parts of the business to arrive at a target price of £24.40.

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