The dilemma facing ‘unloved’ companies, say Robson Rhodes which compiles the Unloved Companies Index, is clearly shown by a comparison of their market growth rates with the rest of the stock market.
Last year’s UCI Top 50 had a compound annual growth rate nine times higher than the FTSE All Share – 72% compared with just 8%.
However there is good news for these ‘unloved’ companies, as the report suggests that there is now a window of opportunity to win back the City’s attention with the shift from defensive to higher growth cyclical stocks.
Key findings have revealed that vast majority of companies in last year UCI Top 50 have moved out of this year’s list, indicating the stock market’s acknowledgement that they were undervalued.
The research also stated that analysts are becoming more short-termist as a result of the global downturn increasing the likelihood of companies with strong long-term growth records losing out to short-term performers.
David Maxwell, partner at Robsons, said: ‘This research is born out of the frustration felt by many senior mid cap executives.
‘It is widely acknowledged by most mid-cap companies that they are not consistently followed because of their smaller size. They suffer from a general lack of liquidity because of the behaviour of the large fund managers whose sector weighting requirements lead them to take stakes in large cap companies.’
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