No More Dumpster Diving for Cheap Stocks
Last year investors just had to buy the "cheapest, nastiest stocks" around and watch them rally in the "dash to trash," but this year requires a more measured approach, Karen Olney, strategist from UBS, told CNBC Monday.
Investors should look to undervalued stocks that got left behind in the rally of 2009 and position their portfolios for both growth and a double dip in the economy, according to Olney.
"We're looking at laggard stocks, some of them cyclical. They didn't move with the recovery rally, they offer above average dividend growth, earnings growth, a lot of them are cyclical and we also give them a quality ranking," she said.
- Watch the full interview with Karen Olney above.
Stocks on UBS' buy list include: ABB, MAN, Air Liquide, BP, Nestle, SAP, Syngenta, GlaxoSmithKline, Centrica, Nestle, Fresenius Medical, HSBC, Novartis, Diageo, TNT and TUI Travel .
"We're not suggesting you make a blanket move into high-quality defensives because you've got a recovery going on, that would be dangerous. You need some beta, you need some protection," Olney said.
UBS' stock portfolio gives "some exposure to growth if that should happen, but you're not overpaying for it," she added.
Simon Goodfellow, head of European equity strategy research at ING Wholesale Banking, said that he agreed with buying BP and Novartis, but thought that Nestle was "a bit expensive" and there were doubts over ABB's quality.
"The real risk going into 2010 is buying low-quality, nasty stocks," Olney said.
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