Investors looking for a rub of the green in 2016 should apparently look no further than the Emerald Isle. Ireland is set to top the EU GDP growth table for the third year in a row according to research from Investec.
After posting GDP growth of 7.1% in 2015, Ireland was European Union's fastest growing economy last year and this year, despite less than spectacular global growth (forecast at 3.6%), it is set to grow by anything up to 5% in 2016.
But it wasn't just the headline macros that evidenced the strong recovery. The Irish stock market significantly outperformed its European peers and the ISEQ index finished the year 30% higher. This impressive performance was broad based, including a strong performance from blue chip names such as Ryanair and CRH. Looking at the top five performing Irish stocks, Investec reckons their outperformance was driven by not only positive earnings revisions through the year but also impressive deals and/or strategic repositioning. The broker notes that 'on average, the top five performing stocks – Dalata (DAL), Kingspan (KGP), Irish Continental Group (ICGC), DCC (DCC) and Ryanair (RYA) – recorded EPS upgrades of 54% with the highest revision achieved by Dalata (118%) followed by ICG (65%) and Ryanair (42%).
Good dealmaking was another salient feature for 2015's outperformers. Kingspan acquired Joris Ide in January 2015 and finalised the Vicwest transaction first mooted in November 2014.
Between these two deals Kingspan’s scale increased by a third while also broadening its geographic exposure. Dalata acquired Moran Bewley Hotels in February 2015, which brought 2,506 new rooms into the Group. In May 2015, DCC acquired Butagaz of France, its largest ever deal. Irish Continental Group successfully delivered on its exposure to the Irish economy and announced the acquisition of four container vessels in November for a quarter of their new build cost. Finally, Ryanair's strategic repositioning continued with growth at primary airports and much improved customer service resulting in clear market share gains and real pricing gains.
In the large cap space going forward Investec favours Bank of Ireland (BKIR), CRH, Ryanair and Smurfit Kappa Group (SKG) while in the mid cap space, top picks include Dalata, Hibernia (HBRN) and Irish Continental Group.