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“Buy the sub-sector or sell everything”

A research report published this week argues specialist lenders’ punished share prices mask their ten-bagger potential, and that large mortgage lenders could be in for trouble
August 18, 2020

This week, in a note on UK-listed specialist lenders, Numis made a bold call. “Investors should either buy the sub-sector or sell everything,” the investment bank’s analysts advised clients, highlighting high-cost credit providers including Provident Financial (PFG), International Personal Finance (IPF) and non-performing loan manager Arrow Global (ARW) as potential ten-bagger stocks over the next five years.

And yes, by “everything”, Numis means all equities, according to James Hamilton, the lead author of the report.

That view requires some unpacking. For a start, in the interests of full disclosure, several of the companies mentioned - IPF, Arrow and OneSavings Bank (OSB) among them – are clients of the brokerage. Second, Numis’ bullishness does not hinge entirely on the sub-sector’s growth prospects, though the report does argue that specialist lenders “will continue to consistently deliver superior growth…over the medium to long term”.

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