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.'
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.'
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.
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.'
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.'
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.'
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.'
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.'
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.'
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.