43 stocks to buy now as recession risks and volatility rise: UBS

  • Stocks have struggled in 2022 as economists and executives warn of a recession.
  • But Keith Parker, head of strategy at UBS, played down fears of economic weakness.
  • Here are 43 buy-listed stocks that UBS analysts said they are most bullish on right now.

Investors have been punished this year for using the “buy the dip” strategy that has worked so well for much of the past decade.

Most actions outside the hot energy sector have been weighed down by a litany of concerns, including high inflation for four decades, tighter financial conditions, the Russia-Ukraine war and growing popular sentiment that ‘another


recession

arrived. Those fears have sent U.S. stocks, as measured by the S&P 500, down more than 12% year-to-date.

But despite how difficult it has been to stay invested as risks increase and


volatility

rises, some market pundits think it would be unwise to ditch stocks altogether now.

“From a strategic perspective, we found that the risk/reward ratio is attractive when this recession risk is assessed (>80%),” wrote Keith Parker, head of US and global equity strategy at UBS, in a note at the end of May.

Parker wrote in a later note detailing his investment strategy that US stocks now appear to be oversold by four percentage points. His model indicates that the fair value of the S&P 500 is 4,300, which is roughly the midpoint between where the index entered the year and its 2022 low.

Turning to the economy, UBS’s chief strategy officer wrote that worries about a recession are “at odds with fundamentals” as leading leading indicators have yet to peak.

“We are seeing a disconnect in equity markets between recession fears and the current fundamental backdrop,” Parker wrote in a May 31 note. “Our logit model suggests that stocks are pricing in a roughly 30% probability of a recession by year-end (>85 pctl), despite ‘hard data’ models pointing closer to 0%. “

UBS recession pricing


UBS


Parker isn’t alone in thinking the United States will avoid a recession. Tom Kennedy, JPMorgan Private Bank’s chief investment strategist, recently told Insider that markets are underestimating the Federal Reserve’s ability to contain inflation without causing a downturn.

If this bullish thesis is correct, then economically sensitive stocks should outperform their defensive peers, Parker wrote. Cyclicals have lagged defensives by 10 percentage points over the past three months, the strategist wrote, which he said was the biggest difference between the two since 2012.

Stocks in the following sectors have performed worse than expected and may rebound, Parker wrote: durable consumer goods and clothing, transportation, media and entertainmentand hardware.

43 buy-listed stocks to target

But Parker isn’t the only one at UBS with investment ideas. Last month, the company polled its 38 North American equity analysts for their “most compelling calls” for the remainder of 2022.

UBS analysts shared 44 investment ideas, 43 of which were stocks to buy. An analyst has recommended selling shares of consumer goods conglomerate 3M (MMM).

Each name listed for the buy is seen by analysts as having more upside than downside in what may continue to be a choppy market, but investors should still be wary of downside risk.

“As we move later in the cycle, avoiding the biggest underperformers becomes even more important to portfolio returns,” Parker wrote in the late May note that accompanied the stock picks.

Below are the 43 buy-listed stocks UBS analysts are most confident in, along with the ticker, market cap, sector, price target and thesis for each.

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