Here are the top stock picks from UBS for the rest of the year
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Although the U.S. stock exchange has experienced one of its worst start to a calendar year, it is possible for some recovery after such a wide pullback. UBS analysts put together a list that included names not as popular with Wall Street firms that could have downside potential but that offer upside potential. We have chosen stocks that we feel our analysts can offer a unique view, versus consensus and have access to interesting or proprietary data (from UBS Evidence Lab) From a strategy perspective, we’ve found that risk/reward is attractive when this much recession risk is priced ( > 80pctl) but as we move later cycle, avoiding the biggest underperformers becomes even more important for portfolio returns,” the UBS note said. It includes selections from all industries, such as Big Tech and small energy firms. Bank of America, one of the largest names in the list, is the top pick. The theory is that financial stocks such as banks will perform well when interest rate rises because they have higher net income. Bank of America has fallen nearly 17% because of fears of a possible recession. UBS views Bank of America as an exceptional peer in net interest income. This could prove to be good news for investors, should the macroeconomic climate change. We expect BAC will deliver peer-leading NII growth in 2022 and 15% in 2023. This compares to the 18%-18% for all of our coverage universes, respectively. “This is largely due to BAC’s highest in-class asset sensitivity position, which makes it highly levered towards short term interest rates. It has strong loan growth and arguably one the lowest rate sensitive deposit bases. Energy has been the sector with the best performance this year. Energy prices have soared due to the return of travel and disruptions in fuel supplies caused by Russia’s invasion. UBS stated that natural gas company Cheniere Energy may benefit from higher prices in order to balance its books. UBS Global Energy team demand/supply analysis indicates that the global LNG market will be short of gas until 2026. The management has reiterated its primary focus to investors via conference calls that it will continue to grow while the ‘leftover money’ will be used in 22 to reduce debt and support potential investment grades… with the possibility of additional capital return in the form a buyback, or dividend initiation in ‘23,” said the note. The cybersecurity sector is expected to be in high demand. UBS named CrowdStrike as one of the best choices for this year. The note stated that while the macro environment is likely to continue to penalize high-value names, UBS sees less fundamental risk in cybersecurity and has growing confidence in CRWD’s platform expansion. It also said that high quality names such as CRWD will be able to weather economic difficulties better. The stock has performed poorly this year but UBS set a $240 price target for CrowdStrike. This is 40% more than the price at which CrowdStrike traded on Friday.
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