UBS is shaking up its list of top stock ideas for next year.
“We believe 2023 should bring inflection points for inflation, growth and economic growth as financial markets deal with a complex geopolitical backdrop,” UBS’s global equities team wrote in a comment.
The global, bottom-up stock list represents “the highest conviction of stock ideas that benefit from the opportunities opened up by these inflections, while incorporating them with dynamic tactical ideas.”
The benchmark is the MSCI All Country Word Index (NASDAQ: ACWI). There are six additions and five deletions and one slot open.
“To better reflect the forward-looking nature of our stock preference approach, we renamed the former ’22 for ’22’ theme and stock option in November 2022 to ’23 for ’23,'” UBS said. “The investment philosophy and underlying stock selection methodology remains unchanged.”
The list has a defensive position and is underweight US, overweight UK underweight Info Tech (XLK) and overweight Energy (XLE).
- AbbVie (ABBV) – “We think the market is over-punishing ABBV for the expected decline of its leading Humira franchise – with a biosimilar coming to market in 2023 in the US – and underestimating ABBV’s growth potential from its diversified product mix.”
- Alexandria Real Estate (ARE) – “The company has a strong balance sheet with a well-guaranteed dividend, leading margins and the best portfolio and management team.”
- CSPC Pharmaceutical (OTCPK: CSPCY) – “CSPC is aggressively expanding its oncology license and is one of the few companies developing a second-generation mRNA COVID vaccine, which is expected to receive IND approval from the FDA in 2023.”
- MediaTek (OTCPK:MDTKF) – “Tactically, we expect its inventory levels to decline in the coming quarters and we see an improving risk benefit given its beaten P/E valuation.”
- Mercedes-Benz (OTCPK:MBGYY) – “Its order book remains strong and we believe the company is on track to show further growth momentum in 2022 and beyond, which is likely to help the stock outperform.”
- Meta Platforms (META) – “The company is currently taking steps to be more capital efficient, including reducing the number of employees, which could be a source of upside profits through 2023 … We also believe that Meta’s lower costs for advertisers may open opportunities for ASP increases over time.”
- ICICI Bank (IBN) – “We remove ICICI to make way for exposure to semiconductors instead.”
- PTT Exploration & Production (OTCPK:PEXNY) – “We divest PTT E&P to reduce our heavy exposure to energy in favor of healthcare, another preferred global sector.”
- Reckitt Benckiser Group (OTCPK:RBGPF) – “We removed Reckitt Benckiser to make way for another European consumer discretionary stock that fits even better with our underlying investment theme 23 for ’23.”
- Thermo Fisher (TMO) – We “are removing due to concerns about margin pressure in 2023 as COVID tests normalize and FX headwinds.”
- Visa (V) – We “remove the name due to concerns that the recovery in cross-border volumes could stall and reverse as global growth slows and some regions enter recession.”
- Airbus (OTCPK: EADSY) – “Following the cutback in Airbus production caused by the pandemic, we expect the company to increase production in the coming quarters.”
- BAT UK (BTI) – “In our view, BAT should continue to gain market share in its largest market, the US, driven by price and mix. Vapor sales should benefit from the recent price increase on its Vuse pods.”
- CapitaLand Integrated Commercial Trust (OTCPK: CPAMF) – “CICT is a proxy for Singapore’s economic reopening. We believe the improving rental outlook in Singapore’s office and retail sub-sectors should benefit landlords like CICT.”
- CP ALL (OTCPK: CPPCY) – “We see the reopening of the Asian economy as a boon for CP All, as the convenience store business is set to recover from depressed sales due to closures from the COVID-19 pandemic.
- Exxon Mobil (XOM) – “Exxon has regained its competitive strength and operating strength in our view. This, combined with a strong balance sheet and an attractively valued stock, makes Exxon our best idea among US majors.”
- Glencore (OTCPK:GLCNF) – “In our view, it affects some desirable products, which benefit from the structural trend for a higher metal content and lower carbon world.”
- Johnson Controls (JCI) – “Johnson Controls should benefit from resilient demand trends in non-residential HVAC and building management software despite supply chain failures in FY2Q.”
- Lockheed Martin (LMT) – We “do not believe that forecasts for next year fully reflect the prospects for increased revenue driven by increased defense spending by the United States and international allies.”
- Marriott International (MAR) – “Marriott has ample liquidity and will likely begin returning capital to shareholders as travel improves.”
- Merck (MRK) – “We believe that with more pipeline data and the resolution of broader drug pricing fears, MRK can trade much closer to its 10-year average valuation.”
- NextEra Energy (NEE) – “We view NextEra as one of the best utilities in the US, with solid growth and top-notch operations.”
- Palo Alto Networks (PANW) – “Over the long term, we expect the company to gain share in the highly fragmented cybersecurity industry due to its differentiated platform and targeted acquisitions, as well as an increased focus on cloud-based security solutions.”
- Roche (OTCQX:RHHBY) – “After some disappointment, the market is assigning a low value to Roche’s late-stage pipeline, allowing for a positive surprise if assets like tiragolimab (cancer) or ganterenumab (Alzheimer) deliver positive Phase 3 data.” “
- SLB (SLB) – “SLB, given its global exposure and technical capabilities, is set to benefit from a likely multi-year increase in upstream spending both onshore and offshore.”
- TotalEnergies (TTE) – The company “is particularly well-positioned for the energy transition and can benefit from its business capabilities, battery and solar technologies and customer access.”
- United Overseas Bank (OTCPK: UOVEY) – “It is benefiting from the regional economic recovery, while the removal of regulatory restrictions on dividends could be an added incentive, in our view.”
SA contributor Bohdan Kucheriavyi has a buy on META, but also says the Metaverse rotation is doomed.