Investment bank Credit Suisse raises its rating on the advertising agencysector and hotels sector to "benchmark" from "underweight," arguing that thestocks in these sectors could benefit from a rise in U.S. consumer spending.
"The fundamentals for U.S. corporate spending look good. Record high freecash flow, near record low leverage, an abnormally old capital stock, aninvestment share of GDP only slightly above typical recession lows and a recordgap between the return on assets and cost of debt. However, the outlook is farless strong in Europe," Credit Suisse strategists write in a note.
European advertising agency and hotels stocks that could do well includeadvertisers WPP and Publicis , and hotel companiesIntercontinental Hotels , Millennium & Copthorne and StarwoodHotels & Resorts .
The Credit Suisse strategists also raise their weighting on the softwaresector, highlighting stocks such as Germany's SAP , Symantecand security systems company Ingersoll-Rand as top picks.
"We upgrade ad agencies and hotels to benchmark (from underweight) and addto software (our biggest overweight). Advertising is the corporate spending playthat tends to turn the earliest in the macro momentum cycle and P/E (price toearnings) relatives do not look expensive. Hotels with U.S. exposure benefitfrom strong capital discipline among U.S. hotels," states the note.
Credit Suisse adds that it reduces its weightings in the pharmaceuticals andretail sector, and remains with a "benchmark" weighting on cyclicals stocks.
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Keywords: MARKETS EUROPE STOCKSNEWS (EQUITY STRATEGY CREDIT