Time to Go Contrarian and Buy French Stocks, Jefferies Says

Berenberg's Pickering Sees Opportunities in France

Investors should look beyond political risks and buy French stocks ahead of the country’s presidential election in April and May, as the shares enjoy earnings upgrades while still trading at attractive valuations, Jefferies equity strategists said.

Equity investors appear to be taking a “wait and see approach” toward French equities even though the country’s output indicators have been expanding since mid-2016, strategists including Sean Darby and Kenneth Chan wrote in a note to clients on Tuesday.

“While sentiment is terrible, the population of stocks with positive earnings revisions and target price increases is one of the highest of the bourses we cover,” the strategists wrote, raising their recommendation on French stocks to “bullish” from “modestly bullish.”

Jefferies sees plenty of French stocks that trade below 1.25 times their book value, or with with free cash flow of more than 5 percent. By comparison, members on the Stoxx Europe 600 Index on average trade at 1.8 times their book value.

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