1. Airbus
Airbus will benefit from rising air traffic currently growing at 4.5% to 5%, and robust demand for aircraft in an "oligopolistic" market.
"The Airbus equity story is strong enough to push through short-term disruption to trading and overtly negative news flow," Jefferies analysts said in the note. "Airbus is less risky and able to increase returns to shareholders, perhaps through significant share buy-backs or dividends, with annual free cash flow (FCF) likely to increase significantly" in 2021 and 2022.
Key advantages: High barriers to entry, consistent positive free cash flow generator, "incremental" cash return.
Source: Jefferies
2. Amplifon
Amplifon is the global leader in hearing aids with more than 11,000 points of sale across 29 countries. The company has the opportunity to expand into new markets and develop products that appeal to more people. It also stands to benefit from a growing and ageing world population, and sales shifting from independent retailers to large chains.
Key advantages: Good management track record, high barriers to entry, consolidation opportunity.
Source: Jefferies
3. Assa Abloy
Assa Abloy designs and manufactures door locks, keypads and other door-opening solutions. It's likely to benefit from a structural shift away from mechanical locks to electronic and digital ones, Jefferies says, listing "structural drivers" like: growth as digital locks go mainstream, "Internet-of-things," smart-device proliferation, urbanization.
The bank says Assa is working with Apple for the contactless student ID market, and notes that "the digital locks market is still in its infancy, particularly in the US where Assa estimates market penetration is under 10%."
Key advantages: good management and track record, high barriers to entry, pricing power, "consistent" free cash flow generation
Source: Jefferies
4.Beazley
Beazley is a London insurer best known for its cyber insurance product, Beazley Breach Response (BBR). It stands to gain from soaring demand for cyber insurance as data breaches rise in frequency, the growth of online commerce, and new data protection regulations, Jefferies says.
"Against a backdrop of surging demand and new data breach regulation, we expect Beazley to continue its cyber growth at 26% per annum, reaching 25% of earnings by 2020," the analysts said.
Key advantages: good management and track record, high barriers to entry, industry consolidation opportunity.
Source: Jefferies
5. Burford Capital
Burford Capital is an asset manager that specialises in litigation finance. Its scale and access to deals and capital give it a leg up on the competition in the large, immature, fast-growing litigation finance market.
"Litigation finance can generate profits of several times invested capital and matters concluded from Burford's foundation to 2017 averaged 75% returns over an 18-month duration," the analysts said.
Key advantages: good management and track record, pricing power, high barriers to entry
Source: Jefferies
6. DSM
DSM develops and sells health, nutrition and materials products for markets such as animal health, personal care, and construction. It has shifted its focus towards industrial biotech and nutrition, and stands to benefit from global megatrends in nutrition, health, climate, energy and resources.
"We see Nutrition margins withstanding cyclicality in animal feed demand – Animal Nutrition ended full year 2018 with 8% organic growth (4% volume, 4% price), with conditions in all regions favorable," Jefferies said.
Key advantages: good management and track record
Source: Jefferies
7. GB Group
GB Group specialises in identity intelligence software that lets organisations verify people's identities, track their locations and validate their documents. It should benefit from international expansion as well as growth in online transactions, personal data and data regulations.
"The growing importance of identity data intelligence coupled with GBG’s robust global platform supported by a vast network of data suppliers makes it a strategic asset," the analysts said.
GBG’s addressable market is worth about $10 billion, and Jefferies estimates it may reach a compound annual growth rate of about 11%, reaching an estimated $16.4 billion by about 2022.
Advantages: good management and track record, pricing power, high barriers to entry, cash generation
Source: Jefferies
8. Kering
Kering owns brands such as Gucci, Balenciaga and Yves Saint Laurent. Jefferies expects Gucci's sales and profits to grow, highlighting its stellar social media presence. With a price to earnings ratio in the mid-teens, Jefferies says "the stock is hardly expensive."
"As a reminder, China customers on average spend 31% more than US customers at Gucci," they said. "Millennials at 62% of sales is a measure of strength, while 56% of the store network not yet refurbished flags upside in conversion and retention."
Key advantages: good management and track record, pricing power, strong cash generation
Source: Jefferies
9. Kone
Kone specialises in elevators, escalators and automatic doors. As the market leader in China, it should benefit from urbanization, a mushrooming middle class, and demand for its modernization and maintenance services.
"Its well-capitalized balance sheet offers scope for large M&A and/or improved dividend return to shareholders," the analysts said. The bank expects a full-year dividend yield of 4%, excluding any special dividend.
Key advantages: good management and track record, strong cash generation
Source: Jefferies
10. Lonza
Lonza is a life sciences company that provides ingredients to the pharmaceutical, nutrition, agricultural, personal care, and other markets. It stands to benefit from a growing and ageing world population and greater adoption of biopharmaceutical products.
The Pharma & Biotech unit "remains the key growth driver, with impressive" 2018 organic growth and 32.8% EBITDA margin annual gains. "We see scope for an upgraded margin aim."
Key advantages: good management and track record, high barriers to entry
Source: Jefferies