According to UBS, the outlook for equities is more favorable with inflation slowing and the Federal Reserve considering cutting interest rates by the end of the year. However, the risks and rewards from a continued market rally are limited, as “considerable” optimism is already priced in, according to the Swiss bank’s chief investment officer. Against this backdrop, UBS believes investors should maintain a neutral view and remain strategic in their equity allocation. The firm believes a portfolio of 20-25 stocks would allow for sufficient diversification while remaining selective. In the second half of the year, UBS identified 24 stocks for its global top picks list. These are all the firm’s highest conviction ideas, benchmarked against the MSCI All Country World Index, which is up more than 12% in 2024. Some of the stocks included in UBS’ list are: One of the additions to the list is San Diego-based medical device maker Dexcom. The stock is down more than 9% year to date, but UBS sees attractive entry points after the dip. Although the continuous glucose monitoring (CGM) segment of the diabetes market has grown over the past few years, UBS said penetration rates in the larger diabetes market are “relatively low.” This means there is a “long road of growth” ahead as adoption continues. “The global CGM market has grown consistently over the past few years, and we see the targeted CGM market continuing to expand over the next decade as payers recognize its benefits across a broader range of diabetes patients,” analyst Eric Potoker wrote in a note. “We expect DXCM to remain a major player in the highly concentrated CGM market.” UBS also recommended casino and lodging operator MGM Resorts, citing its strength in Las Vegas and healthy prospects, especially in its convention business. UBS also expects event activity to pick up due to the impact the Super Bowl, Formula 1, and the Sphere venue have had on Las Vegas. Samsung also made it onto UBS’s recommended list. UBS sees the company as a leader in 5G smartphones, which it expects to see significant earnings growth in the coming quarters. UBS cited improving memory chip prices and strengthened guidance for high-bandwidth memory (HBM) shipments as catalysts. Samsung on Wednesday launched the Galaxy Ring, a lightweight ring designed to monitor health vital signs around the clock, a way to consolidate its products and that could help boost sales of its other products, especially smartphones. Ralph Lauren was named a UBS favorite due to its brand improvement strategy. UBS sees the company at an attractive valuation, with its shares trading at 16.4 times earnings over the next 12 months, according to FactSet. The stock could rise more than 27% in 2024.
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