How top 30 shares could soar 63%

It's four months since Barclays last published its European Top Picks report. Since then, the STOXX Europe 600 Index is down 11%, but has bounced 12% from the mid-February lows. The FTSE 100 has risen as much in the past eight weeks, but our blue-chip index is down less since before Christmas. However, the broker thinks there are some great bargains now.

"In aggregate for Barclays Top Picks, European analysts view this weakness as a buying opportunity and foresee a 33% average upside potential to their price targets under their base cases," writes Barclays' equities team Monday.

"If the most optimistic scenarios play out, this could rise to a 63% average upside potential, with the risk of losing an average of 14% if the downside cases materialise."

The 30 favourites currently trade on an estimated 12-month forward price/earnings (PE) ratio of 13.6 times, in line with the market, and offer a prospective dividend yield of 3.4%.

And, if Barclays' European equity strategist is right, a move higher could see outperformance from cyclicals, particularly consumer discretionary, industrials, technology and financials.

Best ways to play this theme in the UK include newly-merged betting giant Paddy Power Betfair and insurer Aviva. Over the Channel, it's Luxottica, BMW, Safran, SAP, Nokia and ING.

Of course, the upcoming UK Referendum on European Union (EU) membership, slated for 23 June, is the big near-term risk for local equity markets. A de-rating in of UK domestic stocks implies this is already being priced in. Indeed, the relative PE of UK consumer discretionary versus the staples sector suggests investors anticipate a decline in discretionary spending growth to zero.

"This appears quite conservative," says Barclays. "If the UK votes to remain in the EU, [Barclays' strategist] feels that domestically focused UK stocks look undervalued and are pricing in an economic scenario that is much worse than Barclays' economists' projections."

Here are the London-listed firms making Barclays' top picks:

The Europeans include BMW, Delhaize, DNO ASA, ING, Unilever NV, Grifols SA, Roche, Safran, ABB Ltd, Publicis Groupe, Luxottica, SAP and Nokia.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.