The U.S. stock market has had one of its worst starts to a year on record, but there could be some bounce-back potential after such a broad pullback. Analysts at UBS put together a list of top picks for the rest of year, including names that are less popular at other Wall Street firms, that have upside potential and relatively limited downside. "We've focused on stocks where we believe our analysts have a truly differentiated view vs. consensus, and where we have interesting or proprietary data sources (from UBS Evidence Lab or elsewhere). 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. The list includes picks from every sector, including Big Tech companies and smaller energy firms. One of the biggest names on the list is Bank of America . In theory, financial stocks like banks are supposed to perform well when interest rates rise, because higher interest rates help with net interest income and other factors. However, fears of a recession have largely overshadowed that in 2022, and Bank of America's stock has dropped nearly 17%. UBS sees Bank of America as a standout among its peers in terms of net interest income, which could be good news for investors if the macroeconomic environment changes. "We expect BAC to deliver peer leading NII growth of 20% in 2022 followed by 15% in 2023, compared to 18% and 12% for our entire coverage universe, respectively. This is largely driven by BAC's best in class asset sensitivity position making it highly levered to short term interest rates, aided by strong loan growth, and arguably one of the least rate sensitive deposit bases in banking," the note said. The best-performing sector this year, on the other hand, has been energy. The return of travel, combined with the disruption to fuel supply caused by Russia's invasion of Ukraine, has sent energy prices soaring. It is unclear if those high prices will fall any time soon, and natural gas company Cheniere Energy could benefit from the higher prices to retool its balance sheet, UBS said. "UBS Global Energy team supply/demand analysis suggests the global LNG market to be short gas through 2026. Management has reiterated to investors on conference calls that its main focus will be growth while any 'leftover cash' will be used for debt reduction in '22 to support potential investment grade ... with a potential additional return of capital in the form of a buyback or dividend initiation in '23," the note said. Another sector that seems likely to experience healthy demand in the years ahead is cybersecurity. UBS named CrowdStrike one of its best picks for the rest of year. "While the current macro environment could continue to punish high valuation names, we see less fundamental risk in cybersecurity, have growing conviction in CRWD's platform expansion, and expect high quality names like CRWD to better weather economic challenges," the note said. The stock has underperformed the broader market this year, but UBS has a price target of $240 per share for CrowdStrike. That is more than 40% above where the stock was trading on Friday.
PieGG was started with a common goal of serving the finance community while they make transitions. All our team members bring to table their unique expertise and experience of stock market which they would like to pass on to future investors.
39843 Cedar Blvd, Newark, CA, 94560, United States
:+1 408 444 7337