European blue chips with a strong analyst recommendation score, thanks to the publishing of notes flagging the stock as a “buy” or “strong buy”, have historically outperformed their peers, research from Deutshe Bank shows.
Buying the top five names in the STOXX 600 index based on their recommendation score under the Thomson Reuters I/B/E/S consensus analyst estimates system in any given month yielded a median annual outperformance of 12 percentage points over the index, with a Sharpe ratio of 1.5 times and a hit ratio of 92 percent, according to Deutsche.
The bank excluded any companies which were covered by fewer than 10 analysts “to improve the analysis’ quality”.
In June, the stocks that fit the strategy are British packaging company DS Smith, Spanish food company Ebro Foods, industrial equipment hire firm Ashtead, natural gas company BG Group and construction-to-airports conglomerate Ferrovial.
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