JPMorgan: These 'cheap' global stocks will beat Big Tech this year

Published Fri, Mar 26 20212:14 AM EDTUpdated Fri, Mar 26 20213:40 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at investment bank JPMorgan have picked a slew of stocks that they say are likely to outperform U.S. technology stocks this year. JPMorgan revealed it had made a tactical switch in favor of European stocks over those in the U.S. in November, and noted that the euro zone's MSCI index was up more than its U.S. counterpart so far this year. "This year U.S. will not be an outright regional leader," the bank's analysts said in a research note published Monday. "We think Eurozone should outperform the U.S." Here are the analysts' "cheap" stock picks: They favor financial services companies. "Banks continue to trade cheap, despite being the best-performing sector ytd (year to date)," the JPMorgan analysts, led by Mislav Matekja, stated. They like French banks Societe Generale and BNP Paribas, as well as British companies Jupiter, Barclays and M & G. They also picked Belgian insurer Ageas, Swiss bank UBS and Dutch group ING. All of its top financial picks were up more than 50% in the 12 months to March 18, with ING up 147% — the market started a bull run after hitting the bottom in March 2020 following the outbreak of the coronavirus pandemic. A rotation away from growth stocks and toward value stocks is the main reason for JPMorgan favoring financial picks. Value stocks refer to those that go up and down with the economy. They can be underappreciated by investors and are different to growth stocks, which are seen as having strong earnings potential. "The key consideration for the regional pecking order is the Value/Growth tilt, given the US bias to Tech, and Eurozone bias to Value/Banks. If Banks are performing better vs Tech, then (the) Eurozone has a fighting chance to outperform," its analysts wrote. U.S. won't be a 'runaway outperformer' JPMorgan said it had favored U.S. stocks over Europe for much of 2019 and 2020, but made a switch in strategy in November. "Better balance sheets than before, attractive valuations, expectation of a further move up in bond yields and (a) robust credit market are some of the supports for Banks," it said. "We do not think that U.S. equities will be a runaway outperformer this year, and expect Japan, and Eurozone, to do better," JPMorgan added. And while U.S stocks outperformed the euro zone by 22% last year and most investors expect another beat this year, JPMorgan does not. The price-to-book discount for value versus growth stocks is "extreme," it said — the price-to-book ratio is a way for investors to pick stocks, with lower ratios likely to mean an asset is undervalued. Meanwhile, the U.S. economy is expected to beat the euro zone this year, but that is likely to switch in 2022, with Europe outperforming the U.S. on an annual basis, JPMorgan added. The earnings picture is similar. "For years, Eurozone earnings were undershooting the U.S., which was closely aligned to the relative price performance. We believe that the gap is set to narrow tactically," the bank wrote.

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Analysts at investment bank JPMorgan have picked a slew of stocks that they say are likely to outperform U.S. technology stocks this year.

JPMorgan revealed it had made a tactical switch in favor of European stocks over those in the U.S. in November, and noted that the euro zone's MSCI index was up more than its U.S. counterpart so far this year.

"This year U.S. will not be an outright regional leader," the bank's analysts said in a research note published Monday. "We think Eurozone should outperform the U.S."

Here are the analysts' "cheap" stock picks: