Experian - "The Big Three" (BUY - 29.75)

Experian plc is a multinational consumer credit reporting company. Experian collects and aggregates information on over one billion people and businesses including 235 million individual U.S. consumers and more than 25 million U.S. businesses. Based in Dublin, Ireland, the company operates in 37 countries with headquarters in the United Kingdom, the United States, and Brazil.

The company employs approximately 17,000 people and reported revenue for 2018 of US$4.6 billion. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Experian is a partner in the UK government's Verify ID system and USPS Address Validation. It is one of the "Big Three" credit-reporting agencies, alongside TransUnion and Equifax.

Experian share price vs FTSE 100

Experian has consistently delivered outperforming returns given the oligopolistic nature of the consumer credit rating agencies' around the world. Revenues, EBIT have been consistently rising YoY due to strong growth in all regions of the world.

Given Experian's global reach, world growth is of particular importance in being able to project future growth for the stock. The U.S. - China trade spat has weighed heavily on growth, currently being at levels not seen since 2008-2009.

According to IMF's "World economic outlook", published the 15th of October we can discern that they project a slightly higher growth for 2020;


"Global growth is forecast at 3.0 percent for 2019, its lowest level since 2008–09 and a 0.3 percentage point downgrade from the April 2019 World Economic Outlook. Growth is projected to pick up to 3.4 percent in 2020 (a 0.2 percentage point downward revision compared with April), reflecting primarily a projected improvement in economic performance in a number of emerging markets in Latin America, the Middle East, and emerging and developing Europe that are under macroeconomic strain.

Yet, with uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize. To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed. To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal".

In order to stave of the detrimental effects of the global trade-war, central banks around the world, particularly the FED have provided a more accommodative monetary policy, reflected in recent drops of the FED-rate;

Currently markets have calmed as a result of the FED's dovish stance and decreases in the FED-funds rate. Whilst the trade-spat is ongoing, and negotiations taking different turns every week, this has not materialised in significant cross-asset volatility. The ViX is currently trading at 12-13, translating to slowly trending upward markets.

Potential risks going into 2020, is the U.S. presidential election, with president Trump facing competition from democratic candidates. Possible volatility might ensue if rival candidates increase in opinion polls as they are less market-oriented than president Trump.

However, prior historical data has showed that presidents tend to get re-elected if the economy is good, which the U.S. definitely is, as seen by multi-decade lows in unemployment. The historical pretext thus mitigates any eminent political risks that could lead to rises in the ViX, with the president enjoying high odds of becoming re-elected.

If the trade-spat were to worsen, we will see increased re-inflationary policies across the globe which would dampen the decreases in world GDP-growth and in the U.S. If the trade-spat were to resolve we would see increased deflationary policies from world central banks.

Therefore, based on these reasons, we believe Experian is poised to move higher,  given its oligopolistic stance among the "Big Three" and favourable macroeconomic conditions around the globe.

Target price is set at 29.75£, for Q2 of 2020.