How are energy investors positioned?
Investing.com -- UBS has released its latest list of top stock picks following the July update, maintaining a neutral stance on U.S. equities overall but favoring specific sectors and names expected to outperform their respective benchmarks over the next 12 months.
The bank continues to rate communication services, financials, health care, information technology, and utilities as "Attractive" sectors, while its latest portfolio changes include a real estate swap.
Specifically, UBS removed American Tower (NYSE:AMT) and added CBRE Group (NYSE:CBRE) to the list, citing growth headwinds at the former while highlighting CBRE’s “extremely efficient and high free cash flow generative business model, a strong global presence, and an excellent balance sheet.”
In its updated lineup, UBS reiterated a number of existing Most Preferred names. In industrials, Boeing (NYSE:BA) was reaffirmed on expectations for production and free cash flow improvements under new leadership, calling shares “attractively valued on a price to normalized free cash flow basis.”
In healthcare, the bank maintained its preference for Eli Lilly (NYSE:LLY), citing “highly visible growth over the remainer of this decade.”
Abbott Laboratories (NYSE:ABT) and DexCom (NASDAQ:DXCM) were also highlighted as the bank’s Most Preferred stocks within the sector.
In information technology, the bank favors Microsoft (NASDAQ:MSFT), Micron Technology (NASDAQ:MU), and Nvidia (NASDAQ:NVDA).
UBS describes Microsoft as offering “an attractive mix of offense (growth, share gains, AI) and defense (balance sheet, margins, annuitized profit pools).”
Micron is backed by improved memory industry trends, while Nvidia continues to benefit from strong demand in AI infrastructure.
“We believe recent fears over the strucutral demand for AI compute has created an attractive entry point for NVDA shares,” the strategist said.
Communication services picks include Meta Platforms (NASDAQ:META), which UBS expects will compound earnings growth on the back of high user engagement and monetization opportunities across Instagram, Reels, and WhatsApp.
Within financials, UBS names Capital One (NYSE:COF), Wells Fargo (NYSE:WFC), and KKR & Co (NYSE:KKR). Capital One is supported by its tech-driven underwriting and the recent Discover acquisition, while KKR is seen as well-positioned to benefit from an eventual recovery in capital markets activity.
Utilities top picks feature Entergy (NYSE:ETR), Vistra, and NRG Energy (NYSE:NRG). UBS notes Entergy’s low customer rates and accelerating Gulf Coast electricity demand, while NRG is praised for its exposure to AI-related data center growth and plans to expand natural gas-fired generation.
In energy, UBS includes ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX), Energy Transfer (NYSE:ET), Kinder Morgan (NYSE:KMI), MPLX (NYSE:MPLX), and Expand Energy. The firm expects stronger cash flows and shareholder returns, with some companies benefiting from rising LNG demand and merger synergies.
The materials sector is represented by Air Products and Chemicals (NYSE:APD), Freeport-McMoRan (NYSE:FCX), and Martin Marietta. Freeport is favored for its copper leverage, while Air Products is undergoing a strategic reset under new leadership.
In real estate, Equity Residential (NYSE:EQR) and CBRE Group are now the Most Preferred names.
Consumer staples picks include Coca-Cola (NYSE:KO) and Colgate-Palmolive (NYSE:CL), while consumer discretionary names feature Home Depot (NYSE:HD), Ralph Lauren (NYSE:RL), and Life Time Group.