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The third quarter earnings are set to start in earnest next week, and some stocks are set up for big jumps when they report, according to a new note from UBS.
The financial firm, which is more bullish on earnings for the S&P 500 than the Wall Street consensus, screened for characteristics that make stocks more likely to see an asymmetric price move when the company reports its results. Those characteristics include improving free cash flow, a decline in the ratio of inventory to sales and a wide range of earnings estimates from Wall Street analysts.
The list identifies "UBS Buy-rated stocks that screen well based on the variables above, on a sector neutral basis, that should offer compelling risk/reward into Q3 reporting," the note said.