UBS just updated its 'highest conviction' stock list with picks to beat the market
UBS named a raft of U.S. and global stocks it says are set to beat a major index in 2023, which it described as a year of "inflection points." The stock picks are its "highest conviction" names, and the list is aimed at beating the MSCI All Countries World Index, the Swiss bank said in a July 11 research note, adding that it did not "shy away from taking some contrarian positions." In a list of "23 for '23" picks, UBS included Baidu , Grab , Merck , Salesforce , Li Ning and Siemens . It updated its stock selection, adding Yum Brands and MGM Resorts International to the list last month, and removing AbbVie and Corteva . "In 2023, we entered 'A Year of Inflections' — for inflation, rates, and growth. Navigating these inflections is key to investment success, as they'll bring challenges and opportunities alike. Our 23 for '23 theme showcases our highest conviction stock ideas that aim to benefit from these inflections," stated the authors of the UBS report, led by Nadia Lovell. How the stocks were picked UBS chose Baidu for its "leading" position as an internet company and said it is positive on the firm's advertising outlook. "Baidu's profitability should improve over the next few quarters, and it's trading at an attractive valuation relative to its historical price-to-earnings ratio," the analysts added. Southeast Asian ride-hailing company Grab made the list for its "double-digit growth opportunities." The analysts said they "favor Grab for its top position in Southeast Asia's ride-hailing and food delivery industries, ample net cash balance sheet, and benign competition." U.S. pharmaceuticals company Merck made UBS' list as it is a "high-quality company trading at [a] reasonable valuation … in addition, we think MRK will likely augment its business development efforts given its strong cash flow," the bank's note said. UBS added MGM Resorts International to its picks, with analysts "encouraged by the continued strength in Las Vegas and a healthy outlook for MGM." They added, "We also expect increased event activity over the next two years with Formula1 in Las Vegas at the end of 2023, the Super Bowl in 2024, and the new Sphere venue opening." The bank picked Chinese sportswear company Li Ning because it is "constructive on the Chinese sportswear industry given its structural revenue growth, supported by the rising "athleisure" trend, higher health awareness, and booming major sporting events in the market." Software firm Salesforce was chosen for its "attractive" valuation. "The stock is likely more insulated versus its peers from a slowdown, given the company's high mix of recurring revenue and activist involvement to expand margins," analysts said. Manufacturing and technology company Siemens made the UBS list for being "at the forefront of the Industrial Internet of Things (IIoT) transformation." The bank also liked its position as a train manufacturer, which is "boosted by an increased focus on efficient transportation," it said. Finally, Taco Bell owner Yum Brands was chosen by UBS for its investment in online sales. "We are encouraged by YUM's operational momentum driven by investments in digital which drove over USD 1 billion of incremental sales in 2022. We think these continued digital investments will keep driving positive performance," the analysts stated. — CNBC's Michael Bloom contributed to this report.
Source: CNBC
