Broker Dowgate picks top large and small companies for 2017

For small caps the City firm plumped for Be Heard Group, Franchises Brands and Satellite Solutions.

Digital marketing group Be Heard was chosen as it’s profitable, cash generative, debt free and looking to scale rapidly. The broker also feels the group’s recent acquisition of Kameleon looks to be "substantially earnings enchancing”, which it believes the market has temporarily overlooked.

Franchise Brands, which consists of four business-to-consumer franchise businesses, made the list due to its buy-and-build strategy proving to be earnings enhancing with central services in place to absorb future acquisitions.

Satellite Solutions, the fourth largest provider of satellite broadband in the world, was selected due to its growing customer numbers, high levels of recurring revenue and increasing average revenue per user.

For blue chips, Dowgate liked the look of Lloyds Banking group, Rightmove and Vodafone.

Lloyds was felt to be a winner as its stock being 11% below pre-Brexit vote and as its acquisition of Bank of America’s MBNA credit card business for £1.9bn will bring in £7bn of gross assets and a business which generated post tax profits of £123m in the first half of 2016.

“The purchase of MBNA strengthens Lloyds’ position in the consumer credit market and should give the group improved access to generate capital and thus increases the potential for higher dividends in the future,” said the broker.

Rightmove is a “key pick” for the broker after its share price weaknesses in the second half of 2016 contributed to a wider slump in the housing market and nervousness around Countrywide closing branches.

“This price drop is unwarranted in our view and presents a good buying opportunity. Closing branches at Countrywide is more complex than just shutting offices as there is an element of transition to a hybrid/digital model which could end up being a positive for Rightmove.”

Vodafone got the third spot with its aim to achieve substantial growth in 2017 and become the world's second largest mobile carrier by subscribers. The group has also benefited from the sale of its Verizon Wireless stake in 2014 to focus on the Europe and developing world, earning £41bn in revenue for the financial year ending 31 march 2016.