UBS taps 30 stocks for 2030 in disruptor sectors: Alpha Tactics

Nov. 13, 2021 4:17 PM ETEnel SpA (ENLAY), HDB, IQVNFLX, AAPL, GOOG, AMZN, MSFT, ORCL, BA, ACN, MA, SONY, PHG, COF, MSF, ASML, SNY, ISRG, ING, SSNLF, AVGO, LIN, DBSDF, ALLY, GOOGL, SIEGY, PYPL, WXXWY, VWAPY, NRDBY, SY, XISHY, GDRXBy: Kim Khan, SA News Editor71 Comments

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  • UBS highlights its picks in its four next-big-thing sectors: Greentech, 5G+, Fintech and Healthtech.
  • "While this is a longer-term focus, we see attractive investment opportunities in the short to medium term whereby companies benefit from significant fiscal spending following the pandemic as well as new technological innovations," the team of equity and thematic analysts writes in a note.
  • In Greentech, where UBS expects governments to act sooner on carbon neutral plans:
  1. Enel (OTCPK:ENLAY) "While the majority of its current renewable capacity/production stems from hydro, wind and solar will be the growth drivers." Risks are exposure to currency, commodity and interest rates.
  2. Linde (NYSE:LIN) UBS would "expect the consolidation in the sector to have the benefit of improving industry pricing. The downside risks to our view are lower earnings growth and reduced synergies from issues with the integration of Linde and Praxair."
  3. Siemens (OTCPK:SIEGY) The company is "at the forefront of the Industrial Internet of Things (IIoT) transformation." The biggest risk would be renewed downturn in industrial demand.
  4. Volkswagen (OTCPK:VWAPY) "In the aftermath of the pandemic, we believe VW will be among the winners and see earnings and free cash flow on an uptrend." Risks include potential cartel violations.
  5. Xinyi Solar (OTCPK:XISHY) "A healthy inventory level and recent price cuts for solar glass to further stimulate demand should help the company." Risks include higher material costs and increased capacity by competitors.
  • In 5G, where UBS remains positive despite growth deceleration:
  1. Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) "We believe Alphabet can post growth longer-term solidly in the double digits as it increases monetization in mobile and YouTube, along with share gains in cloud computing." Regulation is a major risk.
  2. Amazon (NASDAQ:AMZN) "We are strong believers in the future growth of e-commerce, both domestically and abroad." Regulation and a consumer spending slowdown are risks.
  3. Apple (NASDAQ:AAPL) "While an increasing mix of services and non-iPhone revenue will help, we continue to believe Apple will have difficulty growing overall revenue over the intermediate- to longer-term due to headwinds from a saturated smartphone market and a lengthening replacement cycle."
  4. ASML (NASDAQ:ASML) Longer term the stock should benefit from the "extreme ultraviolet lithography product cycle, given its dominant position and a likely significant increase in pricing for these products." Risks include a structural decline in lithography spending.
  5. Broadcom (NASDAQ:AVGO) "Its fabless manufacturing model allows Broadcom to generate strong free cash flow and maintain a lean capital expenditure requirement and to focus on its core strength of semiconductor research and development. The division is well-positioned to tap into the structural demand in 5G related solutions, in our view, as well as data center storage and industrial applications."
  6. Micsrosoft (NASDAQ:MSFT) Shares are attractive with growth and defensive characteristics and risks include lower PC demand.
  7. Netflix (NASDAQ:NFLX) "Netflix achieving sustainably positive free cash flow should aid financial flexibility." Competition is the big risk.
  8. Samsung (OTC:SSNLF) The market "underestimates the company’s execution in the component business, which could lead to higher operating margins." Weak server and handset demand are risks.
  9. Sony (NYSE:SONY) "We expect Sony's gaming business to be an earnings growth driver over the next 1–2 years, as more people may spend time indoors." Key risks "include a decline in smartphone CMOS sensor input coefficients."
  • In Fintech, where UBS says the pandemic has accelerated adoption of all things digital:
  1. Accenture (NYSE:ACN) It has a "proven willingness and ability to evolve its solutions and offerings" shares are relatively highly valued.
  2. Ally Financial (NYSE:ALLY) "Despite recent pandemic-related uncertainty and heightened near-term credit concerns, we see attractive upside potential for ALLY's shares."
  3. Bank of America (NYSE:BA) "BAC's valuation excessively discounts economic and rate risks, in our view, and we believe the risk/return trade-off is attractive." Macro downturn is the chief risk.
  4. Capital One (NYSE:COF) The stock is "attractive given currently low relative valuation and solid longer-term risk return dynamics."
  5. DBS Group (OTCPK:DBSDF) "Singapore banks are likely to be the main beneficiaries of a potential economic recovery."
  6. HDFC Bank (NYSE:HDB) "The group plans an aggressive branch expansion in underpenetrated rural and semi-urban markets" and "plans to continue to invest in and strengthen its digital banking presence in high growth urban regions."
  7. ING (NYSE:ING) "The bank has one of the most advanced digital business models and is a leader in Europe’s sustainable finance sector."
  8. Mastercard (NYSE:MA) UBS expects "double-digit volume growth and midteens EPS growth to resume once the crisis subsides."
  9. Nordea (OTCPK:NRDBY) "The bank has pursued a de-risking strategy in recent years and undergone a significant front to-back office digital transformation. Today, Nordea is a digital leader in the European retail banking sector."
  10. PayPal (NASDAQ:PYPL) "Despite a few risks like rising competition from alternative payment platforms and lower take rates from new merchants, PayPal's dominant share in the e-commerce segment and entry into new segments should support strong growth."
  • In Healthtech, where UBS says telemedicine faces tough comps, but it is confident about mid-term outlook for end-markets:
  1. Cerner (NASDAQ:CERN) The "go-go years of 'meaningful use' EMR platform installation" are gone, but there should be "mid-single-digit revenue growth this year." Risks include government contract delays.
  2. GoodRx (NASDAQ:GDRX) "Given its current low penetration of the market, and the large share of patients with high deductibles or co-pays, we believe GoodRx's core prescription drug business can grow above 30% for the next three years."
  3. Intuitive Surgical (NASDAQ:ISRG) On "a global basis penetration remains low compared to potential applications for robotic surgery. Intuitive is expanding its range of applications for Da Vinci, and rolling out newer, less invasive platforms."
  4. IQVIA (NYSE:IQV) "We see a strong revenue outlook for CROs, driven by post-COVID-19 government-sponsored R&D investment and strong biotech funding trends."
  5. Royal Philips (NYSE:PHG) "The pending disposal of its domestic appliance business will complete the transformation to a pure-play health business."
  6. WuXi Biologics (OTCPK:WXXWY) The company has "stepped into the high-growth vaccine CDMO business, which has been catalyzed by the breakout of the COVID-19 global pandemic."

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