Department store group Debenhams and leading grocer Tesco feature on broker JP Morgan Cazenove’s list of top stock picks for 2011, while fashion giant Next and supermarket group Sainsbury’s should be avoided.

“On a relative basis Debenhams has the greatest self-help opportunity among the UK mid-market clothing stocks, both for driving the top line and mitigating input cost pressure on the margin,” said JP Morgan.

Next though has few self-help options available and its internet business is mature, the broker maintained but added: “Upside risks to our view include Next developing a secondary format or announcing expansion of its international business.”

JP Morgan said Tesco’s growing financial services operation and international scale give it an edge, but it trades at a discount to Sainsbury’s.

However, Sainsbury’s is “almost entirely exposed to a stagnant and saturated UK grocery market”. Additionally there is the chance that Sainsbury’s may cut its dividend or stage further fundraising next year.

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