Buy these 33 top-rated stocks to build a diversified, downturn-resistant portfolio in 2024, according to UBS
- UBS believes the United States will avoid a recession next year, despite a number of serious risks.
- Consumers will reduce their spending, and if the savings rate rises, growth may slow.
- Here are the 33 stocks that the firm’s new stock-picking model recommends for 2024.
According to top strategists at UBS Global Wealth Management (GWM), economic growth will continue in 2024, albeit at a slower pace.
“We believe the US economy is likely to slow as headwinds facing the US consumer build — from higher rates, the resumption of student loan repayments, and other factors,” Solita Marcelli, UBS GWM’s investment chief Americas, said during her firm’s mid-November 2024 outlook webinar. “Ultimately, we think consumer spending will tick down and saving rates will pick up.”
So far, the United States has avoided a post-pandemic recession because consumers have continued to spend. Borrowing costs that are sky-high due to 16-year-high interest rates have not deterred shoppers, who are racking up record levels of credit card debt.
Although betting against Americans’ ability to spend is typically unprofitable, UBS economists believe the trend is not sustainable. A slowdown in spending may hurt some businesses, but it is good for the economy in the long run, as long as the savings rate does not spike unexpectedly.
“We do see the savings rate — the recent savings rate — as unsustainably low, and we expect it to rise over time,” said Brian Rose, senior economist and investment strategist at UBS GWM, during the webinar. “And really, the base of the economy depends very heavily on what happens to the savings rate.”
“If the savings rate just gradually drifts higher over time,” Rose continued, “we can have a soft landing.” However, a faster increase in the savings rate — for example, if the savings rate simply returned to where it was before the pandemic — would quickly push us into recession. So there are risks associated with that.”
Households may be in debt, but the vast majority of Americans have jobs and are even getting modest raises, according to Rose. That’s why UBS isn’t expecting an economic downturn next year, despite the fact that one is still possible.
“We don’t believe a significant recession is likely, and that’s obviously thanks to a strong job market, healthy household and business balance sheets, and solid investment spending,” he said.
Inflation is another important tailwind for the US economy. According to UBS, core price growth will fall to between 2% and 2.5% in 2024, satiating the Federal Reserve and allowing it to ease monetary policy. The firm anticipates two interest rate cuts next year, which will relieve pressure on households. As a result, corporations are likely to see modest earnings growth.
Even if consumer and inflation expectations are met, the United States could be dragged into a global recession if geopolitical tensions in Ukraine and Israel worsen.
“We’re likely to see heightened volatility over the next year as fiscal policy and geopolitical challenges continue to evolve, impacting economic growth and inflation outlooks,” said Daniel Scansaroli, head of portfolio strategy at UBS GWM, during the webinar.
33 top stocks across sectors
While UBS is bullish on 2024, its strategists believe investors should be prepared for anything.
UBS announced a new machine learning-powered model that selects stocks based on firm fundamentals and momentum, as well as investor sentiment and positioning, ahead of the new year. The model looks at companies in the United States, Europe, China, Japan, and Australia.
A UBS team led by senior researcher Nicolas Le Roux shared the stock-picking model’s three highest-rated names from all 11 S&P 500 sectors in a mid-November note. They also included commentary from UBS analysts who follow the companies.
According to Le Roux and his colleagues, the best-scoring stocks in the model came from five sectors or industries: energy, auto components, insurance, capital goods, and materials. Firms in the household personal products, healthcare, food, beverage, and tobacco, technology, and real estate groups, on the other hand, did not fare well in the model.
According to the model, a defensive posture may be warranted as we approach 2024. Telecommunications, utilities, household personal products, and consumer staples rose the most from the mid-October report, while consumer durables, retailing, capital goods, and financials appeared less appealing in comparison to the previous month.
UBS’s recently revamped stock-selection model now favors 33 stocks — three in each market sector. Each is accompanied by its ticker, market capitalization, sector, industry, earnings revisions score on a scale of -1 to 1, and, if applicable, selected analyst commentary. Companies are listed alphabetically with peers from their industries.
1. Meta Platforms
Ticker: META
Market cap: $873B
Sector and industry: Communication Services; Media & Entertainment
Earnings revisions score: 0.98
Analyst commentary:
“META remains one of our Top Picks in the large-cap Internet space, with signs that cost discipline is still a priority and several levers to drive revenue growth such as improved engagement, better ad tech (including Advantage+), ramping up Reels and WhatsApp monetization, and new formats such as Click to Message Ads and Shop Ads.” We believe that near-term catalysts include any improvement in short-term advertising trends and potential
disclosures concerning the GenAI chatbot and Threads engagement trends.”
Source: UBS
2. Alphabet
Ticker: GOOGL
Market cap: $1,710B
Sector and industry: Communication Services; Media & Entertainment
Earnings revisions score: 0.27
Analyst commentary: “While concerns that GOOG will bleed query share to new Bing & ChatGPT have receded in recent months, we continue to see medium-term revenue risk from new search (SGE) disrupting ad inventory with GenAI responses, as well as near-term risk that OI margin expansion will be muted due to seemingly reduced vigor on cost controls and a GenAI-driven investment cycle.”
Source: UBS
3. Comcast
Ticker: CMCSA
Market cap: $172.9B
Sector and industry: Communication Services; Media & Entertainment
Earnings revisions score: 0.74
Source: UBS
4. Ralph Lauren
Ticker: RL
Market cap: $7.9B
Sector and industry: Consumer Discretionary; Consumer Durables & Apparel
Earnings revisions score: 0.5
Analyst commentary: “We rate the stock as a Buy.” We believe the market undervalues RL’s transformational changes to its brand image, distribution model, and cost structure. We forecast a 12% 5-year EPS CAGR and believe the stock is undervalued at only 11x FY2 EPS.”
Source: UBS
5. Royal Caribbean Cruises
Ticker: RCL
Market cap: $27.2B
Sector and industry: Consumer Discretionary; Consumer Services
Earnings revisions score: 0.95
Source: UBS
6. Ford
Ticker: F
Market cap: $41.6B
Sector and industry: Consumer Discretionary; Auto Components
Earnings revisions score: -0.13
Analyst commentary: “Ford has a Buy rating from us.”Higher costs and a rethinking of their EV strategy have soured sentiment. However, EV pushout is likely to result in higher near-term earnings and FCF. It may take some time for the market to regain confidence in the stock, but the earnings bar for 2024 appears low at current levels, so we see a positive risk/reward.”
Source: UBS
7. Costco Wholesale
Ticker: COST
Market cap: $257.1B
Sector and industry: Consumer Staples; Food Staples Retailing
Earnings revisions score: 0.52
Source: UBS
8. Molson Coors Beverage
Ticker: TAP
Market cap: $12B
Sector and industry: Consumer Staples; Food, Beverages & Tobacco
Earnings revisions score: 1
Analyst commentary: “On Molson Coors, we are neutral.” While the company’s recently announced algorithm from Investor Day demonstrated management’s confidence in the company’s underlying growth profile, visibility on ’24 earnings power remains limited, particularly as the company cycles outsized share gains. We see the risk/reward as balanced because shares are trading at a 17% discount to low-growth CPG peers (vs. a 20% historical average discount).”
Source: UBS
9. Constellation Brands
Ticker: STZ
Market cap: $43.6B
Sector and industry: Consumer Staples; Food, Beverages & Tobacco
Earnings revisions score: 0.8
Analyst commentary: “We rate Constellation as a Buy. With underlying momentum expected to drive continued HSD top- and bottom-line growth across the beer business, as well as improved performance across wine and spirits, we see a path to sustainable double-digit EPS growth in the near future. We believe the risk/reward skews to the upside from here, with shares trading at 18.3x NTM estimates.”
Source: UBS
10. EOG Resources
Ticker: EOG
Market cap: $73.3B
Sector and industry: Energy; Energy
Earnings revisions score: 0.67
Analyst commentary:
“We rate EOG as a Buy. It has a best-in-class balance sheet with $1 billion in net cash that will be used to drive higher shareholder returns in the current crude oil price environment, as well as support shareholder returns through dividends.”a downturn, or to improve acquisition economics. Strong
operator with extensive inventory in the core Lower48 basins.”
Source: UBS
11. Marathon Petroleum
Ticker: MPC
Market cap: $56.8B
Sector and industry: Energy; Energy
Earnings revisions score: 0.73
Analyst commentary: “On MPC, we have a Buy rating. Best-in-class shareholder returns, with over $2 billion in share repurchases per quarter. MPC is geographically diverse, with exposure to the Mid-Con, Gulf Coast, and West Coast. MPLX makes a distribution to MPC, which fully covers MPC’s dividend.”
Source: UBS
12. Kinder Morgan
Ticker: KMI
Market cap: $37.8B
Sector and industry: Energy; Energy
Earnings revisions score: 0.67
Analyst commentary:
“We rate the stock as a Buy.” KMI is the newest addition to the UBS Midstream Top Picks lists because it is a catalyst-rich name with initial ’24 guidance that we expect to be above street expectations. We
Because ’23 is the final year of negative earnings contract rolls,
We may continue to see a rising tide of nat gas transport/storage rates across KMI’s base business, providing some hope.
Expectations for growth in 24/25 are above the market.”
Source: UBS
13. Assurant
Ticker: AIZ
Market cap: $8.5B
Sector and industry: Financials; Insurance
Earnings revisions score: 1
Analyst commentary:
“We rate Assurant as a Buy.” AIZ is benefiting from faster-than-expected profit growth in its Global Housing segment, and we expect revenue growth and profitability to improve in its Global Housing segment.
Lifestyles will be a segment in 2024. We anticipate that as growth and margins improve, the “Shares will re-rate higher, returning to historical averages.”
Source: UBS
14. MetLife
Ticker: MET
Market cap: $46.5B
Sector and industry: Financials; Insurance
Earnings revisions score: 0.22
Analyst commentary:
“On Metlife, we have a Buy rating. We believe MET’s Group growth and profitability trends will continue to be favorable, while International growth/earnings may exceed expectations. We also look at the company’s capital.despite its above-peer CRE exposure (which we regard as favorable manageable). As concerns about its CRE exposure fade, we see its”Shares are re-rating to historical levels.”
Source: UBS
15. Marsh & McLennan
Ticker: MMC
Market cap: $98.3B
Sector and industry: Financials; Insurance
Earnings revisions score: 0.93
Analyst commentary:
“We rate the stock as a Buy.” We believe MMC’s above-industry average organic revenue growth will continue as the company’s recent investments in talent continue to pay dividends. In addition,see continued margin expansion as a driver of better-than-expected results profits and free cash flow.”
Source: UBS
16. Cardinal Health
Ticker: CAH
Market cap: $26B
Sector and industry: Healthcare; Healthcare Equipment
Earnings revisions score: 1
Analyst commentary:
“We rate Cardinal Health as a Buy. We are optimistic about Pharma Distribution’s continued momentum, which has been boosted by stable Rx market trends, the ramp-up of nascent specialty offerings, and the growth of the largest players.customers, as well as the potential benefits of vaccine distribution. The Medical Field The segment remains a longer-term turnaround story; we believe shares can re-rate on the back of above-market Pharma growth and upside potential if they meet their Medical targets.”
Source: UBS
17. Molina Healthcare
Ticker: MOH
Market cap: $20.7B
Sector and industry: Healthcare; Healthcare Equipment
Earnings revisions score: 0.64
Analyst commentary:
“We rate McKesson as a Buy because we believe its diverse business model remains a differentiator, allowing it to capture improved Rx economics from multiple angles.” GLP-1 momentum is increasing.both US Pharma and Prescription Services, resulting in a dual-lever growth opportunity long-term forecasting driver.”
Source: UBS
18. McKesson
Ticker: MCK
Market cap: $60.4B
Sector and industry: Healthcare; Healthcare Equipment
Earnings revisions score: 0.51
Analyst commentary:
“We rate McKesson as a Buy because we believe its diverse business model remains a differentiator, allowing it to capture improved Rx economics from multiple angles.” GLP-1 momentum is driving growth in both US Pharma and Prescription Services, creating a dual-lever growth opportunity. Long-term forecasting driver.”
Source: UBS
19. PACCAR
Ticker: PCAR
Market cap: $48.1B
Sector and industry: Industrials; Capital Goods
Earnings revisions score: 1
Analyst commentary: “We have a Neutral rating on Paccar. The company has a solid backlog that will carry their volumes through Q4 and a good part of Q1, but we expect the company to have to reduce their market forecast as 2024 plays out.”
Source: UBS
20. Eaton
Ticker: ETN
Market cap: $90.6B
Sector and industry: Industrials; Capital Goods
Earnings revisions score: 0.96
Analyst commentary: “We rate Eaton as a Buy.” Still our top pick across our multi-industry coverage, we anticipate best-in-class organic growth for ’23-’24, driven by close alignment with industrial megatrends (Electrification, Reshoring, and Data Centers). We see no path to backlog normalization with backlogs continuing to build and mega project ordering approaching, and firm demand trends should support continued margin expansion.”
Source: UBS
21. FedEx
Ticker: FDX
Market cap: $64.3B
Sector and industry: Industrials; Transportation
Earnings revisions score: 0.8
Analyst commentary: “We have a Buy rating on Fedex. We expect the company to execute on its $4 bn DRIVE cost savings program which should provide support for margin expansion and attractive EPS growth in F2024 and F2025. FDX also provides leverage to a potential improvement in freight market activity and valuation for the name is reasonable at a P/E of ~13x on our F2024E EPS estimate. Moderation in capital spending on a multi-year basis and growth in operating income should also translate to improvement in free cash generation.”
Source: UBS
22. Salesforce
Ticker: CRM
Market cap: $218.6B
Sector and industry: Information Technology; Software & Services
Earnings revisions score: 0.62
Analyst commentary: “We rate the stock as Neutral.” Salesforce shares are neutral ahead of the company’s third-quarter/October earnings report. Our partners’ 4Q Salesforce-practice outlooks have softened, raising the risk of a weaker-than-expected 4Q/Jan cRPO guide, but we believe the stock already reflects a fair amount of investor caution.”
Source: UBS
23. Gartner
Ticker: IT
Market cap: $33B
Sector and industry: Information Technology; Software & Services
Earnings revisions score: 1
Analyst commentary: “We have a Neutral rating on Gartner. The company reported a better-than-expected Q3, with Contract Value growth of +8% being more than expected (+7%), and we think this positions the company to re-accelerate CV growth faster than previously anticipated. In particular, CV growth either already troughed in Q3 or possibly troughs in Q4, and we view re-accelerating CV growth as a positive catalyst for the stock. Our Neutral rating is predicated on the post-Q3 stock reaction giving Gartner some credit for this re-acceleration, but admittedly, the progress toward re-accelerating CV growth occurred faster than we contemplated.”
Source: UBS
24. Corning
Ticker: GLW
Market cap: $24.2B
Sector and industry: Information Technology; Tech Hardware & Equipment
Earnings revisions score: -0.91
Analyst commentary: “We have a Neutral rating on the stock as we need more visibility into a recovery in end-market demand, in both display and optical.”
Source: UBS
25. LyondellBasell Industries
Ticker: LYB
Market cap: $31.3B
Sector and industry: Materials; Materials
Earnings revisions score: -0.37
Analyst commentary:
“We maintain a Neutral rating as we see the stock fairly valued on normalized earnings power, and see less near-term upside in plastics markets.”
Source: UBS
26. Linde PLC
Ticker: LIN
Market cap: $198.3B
Sector and industry: Materials; Materials
Earnings revisions score: 1
Analyst commentary: “We rate the stock as a Buy.” Our investment case for Linde is based on (1) EBIT margin expansion of 100bps per year over the next five years, which is the result of organic sales growth of 5-6% per year and management’s cost-cutting efforts; and (2) the company’s ability to sustain an FCF conversion of close to 55%, which is well above its peers at less than 40%.”
Source: UBS
27. PPG Industries
Ticker: PPG
Market cap: $32B
Sector and industry: Materials; Materials
Earnings revisions score: 0.64
Analyst commentary:
“We maintain a Buy rating as we see PPG shares as undervalued,particularly when considering further price/cost benefits.”
Source: UBS
28. AvalonBay Communities
Ticker: AVB
Market cap: $24.3B
Sector and industry: Real Estate; Real Estate
Earnings revisions score: 0.63
Analyst commentary: “On AvalonBay, we have a Neutral rating. Given its portfolio positioning in suburban and coastal markets that are less exposed to supply, the company should continue to generate strong rent growth. Furthermore, its development pipeline should help it grow.”
Source: UBS
29. Federal Realty Investment Trust
Ticker: FRT
Market cap: $7.5B
Sector and industry: Real Estate; Real Estate
Earnings revisions score: 0.49
Analyst commentary: “The stock is rated Neutral by us. FRT’s retail portfolio is located in high-density markets that should continue to attract high-quality tenants. This should result in higher occupancy, higher lease spreads, and greater lease escalators.”
Source: UBS
30. Prologis
Ticker: PLD
Market cap: $102.4B
Sector and industry: Real Estate; Real Estate
Earnings revisions score: 0.17
Analyst commentary: “We have a Buy rating on Prologis. The company has visibility into continued earnings growth over the next several years given recent market rent growth and relatively flat expiring rents through 2025. While supply growth is expected to outpace demand in the near-term, this dynamic should reverse in 2H’24 as deliveries slow.”
Source: UBS
31. Edison International
Ticker: EIX
Market cap: $25.2B
Sector and industry: Utilities; Utilities
Earnings revisions score: 0.48
Analyst commentary:
“We rate the stock as a Buy.” We believe EIX can grow at a 6% EPS rate through ’28E and have provided guidance to support that belief. Works in a positive California regulatory environment. Attempting to recoup $2
billion in wildfire and debris flow events in 2017/18, limiting Bill increases are not required to achieve 6% EPS growth.”
Source: UBS
32. Exelon
Ticker: EXC
Market cap: $38.9B
Sector and industry: Utilities; Utilities
Earnings revisions score: 0.3
Analyst commentary: “We have a Buy rating on the stock. EXC is a pure-play, regulated transmission and distribution company that we see trading at an attractive valuation. At a slight earnings discount on 2025E earnings, we believe the stock is overly discounting risks to the 6-8% annual EPS growth through 2026E. EXC can execute on its goal of being at the midpoint or better of that growth range, in our view.”
Source: UBS
33. CMS Energy
Ticker: CMS
Market cap: $16.7B
Sector and industry: Utilities; Utilities
Earnings revisions score: 0.15
Analyst commentary: “We have a Buy rating on CMS. It is set to deliver on another year of 7% to 8% EPS growth despite weather headwinds. Top quartile EPS growth and regulatory rankings support our view. Could settle the electric rate case where the proposed decision is 12/21. Trades at 10% premium on our $3.64 in ’25E versus 15% 5 year average.”
Source: UBS
