Liberum removes Anglo from 'conviction sell' list; adds Burberry, Taylor Wimpey

Liberum removed Anglo American from its ‘conviction sell’ list on Tuesday as it revised its conviction buys and sells for 2016.

The brokerage noted the shares have tumbled 85% since it added the miner to its conviction sell list back in May 2014.

It said the value of the business now depends on how fast it can close or dispose of loss-making assets.

“We are not optimistic. The political difficulties associated with closing loss-making capacity in South Africa keep us sellers of the stock.”

However, Liberum decided to remove it from the conviction list for now as it considers the implications of faster-than-expected closures and/or a turnaround in the group’s diamond business.

At the same time, the brokerage added Intermediate Capital to its conviction buy list, and Taylor Wimpey and Burberry to the sell list.

It said Intermediate was a compelling investment case, with a solid ordinary dividend yielding 4% and the prospect of a generous special dividend.

“The fast-growing fund management business should help lead to a positive re-rating,” it said, adding the risk profile has improved considerably.

As far as housebuilder Taylor Wimpey is concerned, Liberum reckons the stock will underperform as the overly-optimistic valuation struggles to accommodate the gross margin pressure it expects, as as house price inflation cools and build cost inflation remains high.

“Management may mitigate some of this through cost control, and extensive use of strategic land will help to keep land costs down. Generous shareholder returns come at the expense of volume growth.”

Finally, it said luxury clothing retailer Burberry is the most at risk of its peers, as it has 65% exposure geographically to areas with the slowest sales.

Liberum said the long-term trend in Chinese spending is down, against a backdrop of weak equity markets and further yuan declines.

It also pointed to the impact of the terrorist attacks in Paris last year and said low oil prices could hit customers in high-spending markets such as the Middle East.

“Burberry has cut costs to meet 2016 forecasts but we see limited scope to continue this without damaging the business.”

At 1417 GMT, Anglo shares were up 7.3% to 249.60p while Intermediate Capital was up 2.9% to 588.50p. Taylor Wimpey was 2.7% higher at 184.58 and Burberry shares were up 1.9% to 1,142p.