The US stock market has had one of its worst starts in a year on record, but there could be some potential for recovery after such a steep drop. Analysts at UBS have compiled a list of top picks for the rest of the year, including names less popular than other Wall Street firms, with upside potential and downside. relatively limited. “We focus on stocks where we believe our analysts have a truly different view of the consensus and where we have interesting or proprietary data sources (from UBS Evidence Lab or elsewhere) From a strategy perspective we find that risk/reward attractive when this much downside risk is priced in (>80pctl) but as we move into the latter cycle, avoiding the worst performers becomes even more important to portfolio returns,” UBS notes. The list includes picks from every sector, including big Tech companies and smaller energy companies. One of the biggest names on the list is Bank of America. In theory, financial stocks like banks are supposed to do well when interest rates rise, because higher interest rates should boost net interest income and other factors. However, recession fears have largely overshadowed that by 2022, and Bank of America’s stock is down nearly 17%. UBS considers Bank of America a standout among its peers in terms of net interest income, which could be good news for investors should the macroeconomic environment change. “We expect BAC to post a top NII growth of 20% in 2022, followed by 15% in 2023, 18% and 12% respectively for our entire coverage. high short-term interest rate lending, supported by strong loan growth and arguably one of the least rate-sensitive deposit bases in the banking sector,” the note said. On the other hand, the best performing sector this year is energy. The return to tourism, combined with disruptions to fuel supplies due to Russia’s invasion of Ukraine, has sent energy prices skyrocketing. UBS said it remains unclear whether those high prices will subside any time soon, and natural gas company Cheniere Energy could benefit from higher prices to retool its balance sheet. “The UBS Global Energy team’s supply/demand analysis shows that the global LNG market will be short of gas until 2026. Management has reiterated to investors on conference calls that its primary focus is will be growth while the ‘residual money’ will be used to reduce debt in” 22 to support the potential type of investment … with the possibility of additional return in the form of a buyback or the start of a stock split news in ’23,” the note said. Another area that looks to be in good demand in the coming years is cybersecurity. UBS named CrowdStrike one of the best picks in the rest of the series. year. “While the current macro environment may continue to penalize overvalued names, we see fewer fundamental risks in cybersecurity, increasingly believing in platform expansion. CRWD platform and expect high-quality names like CRWD to better cope with economic challenges,” the note said. g broader this year, but UBS has a $240/share price target for CrowdStrike. That’s 40% higher than the stock traded on Friday.
