Swiss based investment bank UBS is one of the most revered finance houses so when it says jump many investor’s reply is how high, this week they undoubtedly triggered the usual seasonal pullback by the Australian Banking Sector e.g. CBA down -9.7% in just 4-days:
- “While we are confident in the overall banking sector, with rising interest rates providing a shock absorber for earnings, we are cautious on the potential for H2 share price and sector outperformance due to 1) higher than average market ratings (based on PE relative) and 2) near-term macroeconomic downside shocks. – UBS.
MM had previously been cautious the sector through June and UBS’s change of heart towards the space has been more than enough to prove our stance on point. UBS publishes a best ideas list and today we’re revisiting 3 of their best stock ideas as they look to keep portfolios skewed towards “late-cycle” sectors and stocks that benefit from inflation.
- They have focused on solid earnings growth through 2022 during a backdrop of tight global commodity markets, a re-opening domestic economy and record low unemployment.
- Not surprisingly UBS are concerned about stagflation hence they looked for stocks that should outperform during high inflation, and rising interest rates while growth decelerates.
MM likes CBA ~$90 or 5% lower
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