Is the UK Avoiding Recession?

(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Profitability data sourced from Fidelity)

The UK’s service sector grew at the fastest pace in five months in December, reports Bloomberg.

Although still very vulnerable to the euro-area crisis, data suggests the service sector is (for now) overcoming the obstacles.

“A gauge of U.K. services activity based on the survey of purchasing managers rose to 54 from 52.1 in November.” Similarly, a United States services index rose to 52.6 in December from 52 in November.

Readings above 50 indicate expansion while readings below 50 indicate contraction.

UK’s economy also appears strengthened by positive data in regards to construction and manufacturing. However, the service gauge is most significant because service accounts for about 75% of the UK’s economy.

“There is still life in the U.K. economy,” said James Knightley, an economist at ING Group told Bloomberg in an interview. “Nonetheless, the U.K. is still very vulnerable to the euro-zone sovereign debt crisis given trade, financial and confidence linkages. Furthermore, confidence remains weak.”

Business Section: Investing Ideas

Interested in UK stocks? We created a list and started with a list of the largest UK stocks by market cap.

In addition, all of these companies are more profitable than their competitors, based on gross and net profit margins.

These UK stocks have a track record of being more profitable than their competitors–does that make them an attractive target for your watch list?

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List sorted by market cap.

1. Ensco plc (ESV): Provides offshore contract drilling services to the oil and gas industry. TTM gross margin at 49.51% vs. industry average at 34.61%. TTM operating margin at 29.63% vs. industry average at 18.19%. TTM pretax margin at 26.75% vs. industry average at 16.23%.

2. Smith & Nephew plc (SNN): Develops, manufactures, markets, and sells medical devices in the orthopaedics, endoscopy, and advanced wound management sectors worldwide. TTM gross margin at 80.38% vs. industry average at 65.9%. TTM operating margin at 21.89% vs. industry average at 15.08%. TTM pretax margin at 21.18% vs. industry average at 11.62%.

3. Intercontinental Hotels Group plc (IHG): InterContinental Hotels Group PLC owns, manages, franchises, and leases hotels and resorts. TTM gross margin at 55.88% vs. industry average at 37.36%. TTM operating margin at 29.34% vs. industry average at 19.53%. TTM pretax margin at 27.28% vs. industry average at 17.97%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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