JPMorgan is ‘very bullish’ on 12 global stocks

Published Thu, Jun 24 202110:30 PM EDT

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

JPMorgan says the next leg higher in equities is here as its analysts pick the global stocks to ride it. The bank's analysts said they "hold a very bullish call on earnings for this year" in a note published Monday, and listed their top global picks across a variety of sectors. The analysts, led by JPMorgan's Mislav Matejka, noted "substantial increases" in 2021 earnings per share (EPS) projections — a key indicator of a company's profitability — for so-called cyclical stocks and said this trend looked set to continue. Cyclical stocks are those that tend to track the economy's overall performance. "We believe that the next leg higher in equities is upon us," they added. Here are a dozen of their top picks across Europe: Financials JPMorgan likes British firms Barclays , M & G and Jupiter , as well as French companies Societe Generale and BNP Paribas . Also on its list is Dutch firm ING , and JPM is overweight all of the stocks. "Sector looks cheap, has underperformed, earnings are improving and stands to benefit from rising bond yields," the bank's analysts stated. Utilities They also like electricity firms Enel and EDP , and are overweight-rated on the sector as a whole. Materials and industrials The bank's picks include steel firm ArcelorMittal , automaker Volvo , construction materials firm Saint Gobain and electrical supplier Rexel , all of which are rated overweight. 'An opportunity' JPMorgan's analysts noted that earnings per share "momentum" was likely reaching a peak, however this should not be negative for stocks. "Activity is expected to remain significantly above trend for the foreseeable future. This could ensure that forward earnings projections keep advancing, and that EPS revisions do not move back persistently into negative territory," they wrote. There is a widening gap between earnings between cyclicals and defensives — defensives tend to provide consistent earnings regardless of the market in general — with cyclical stocks "overwhelmingly" outperforming defensives, JPMorgan said. And the bank's analysts think the gap will remain wide: "We do not expect the gap to close through forward earnings of Cyclicals peaking, especially not while the growth delivery is substantially above trend," the analysts stated. "Therefore, this could be an opportunity, in particular if we get a resumption of the upmove in bond yields in 2H [second half]," they added. Investors often expect stock prices to fall when bond yields rise. "Regionally, we expect the outperformance of Eurozone vs the US so far this year to continue, in contrast to last year, when we were OW [overweight] US vs Europe," the analysts added.

The Volvo XC40 Recharge electric sports utility vehicle photographed in Los Angeles, California.

Patrick T. Fallon | Bloomberg | Getty Images