Banking

UBS: Buy these 20 stocks ahead of the upcoming earnings season to capture the upside of the historic earnings-per-share growth 2021 will see

  • UBS strategist Nick Nelson says it’s too early for investors to get defensive with their portfolios.
  • Nelson sees more than 50% EPS growth in 2021 and 14% EPS growth in 2022.
  • The strategist revealed 20 conviction stocks that will benefit from earnings momentum catalysts.
  • See more stories on Insider’s business page.

Investors and short-term traders have used earnings momentum trades to boost their profits for decades.

Savvy investors’ ability to spot catalysts for price appreciation in stocks ahead of earnings reports can lead to huge gains.

In a recent note to clients, UBS strategists led by Nick Nelson detailed how May was the best month for earnings momentum trades since investment banks began tracking relevant data in 1988. But there’s still more good news to come.

Nelson said he expects more than 50% earnings-per-share growth in 2021 and 14% growth in 2022 amid the economic recovery from COVID-19. The strategist believes it’s too early for investors to get defensive with portfolio positioning, and recommended taking advantage of the upcoming earnings season to find some momentum trade opportunities.

Because UBS remains overweight European equities, Nelson focused on European stocks that present significant upside after they report earnings in the coming weeks.

This follows the advice of UBS’ chief European economist Reinhard Cluse, who told CNBC in June that GDP growth generated by the EU Recovery Fund will mostly be felt in 2022 and 2023, creating a long runway for recovery in the continent.

“So the next three years, I think, is when we are likely to see the biggest payoff in terms of real economic activity, support for company earnings, particularly in sectors that have benefited from the recovery fund,” Cluse said.

Below, Insider detailed 20 conviction stock ideas where UBS sees upcoming earnings results as potential catalysts for stock price appreciation.

All the stocks listed are European buy-rated equities, with the exception of Boliden, which has a “sell” rating from UBS. Also included are the stocks’ European and American tickers, their sectors, countries of origin, earnings dates, price targets, and the upside to those targets, as well as UBS’ bull case for each company.

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