Investment banks pick their favorite global stock ideas for the fall — here are 20

Published Thu, Sep 16 202112:24 AM EDT

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

Analysts at leading investment banks have picked "buckets of ideas" for global stocks this fall, including top picks to play "megatrends" such as a shift to digital, and those set to beat the U.S. as the economy reopens. UBS published its "Back to School Convictions Calls" in a Sept. 9 note to investors. "We asked our equity research analysts for their top conviction ideas to navigate the market and stay ahead of the curve," the note said, and its buy-rated stock picks cover themes including the economic reopening, and megatrends such as digital and e-commerce. The bank's favored reopening plays include airplane-maker Airbus , with UBS analysts praising the way it managed the coronavirus crisis by reducing costs. They also like its "robust product portfolio" and said airlines are likely to upgrade their fleets to more carbon efficient models. Also in the transport sector, French infrastructure operator Eiffage is buy-rated as the analysts expect freeway traffic to increase in 2022. In hospitality, hotel operator and Premier Inn owner Whitbread is likely to outperform U.K. peers and recover more quickly, according to UBS. "We see opportunities from consumers switching to Premier Inn from weaker competitors," the analysts said. As people revamp their homes during the pandemic, security company Assa Abloy is likely to benefit, according to UBS, and the renovation trend is set to continue. Meanwhile, Covid-19 vaccine-maker AstraZeneca has "best in class" research and development productivity, UBS said, before adding it does not have a "patent cliff" problem, where drugs patents expire and the market opens up to generic pharmaceuticals companies. Megatrends stocks Cardboard packaging producer Smurfit Kappa is set to benefit from a shift in demand from plastics to paper, UBS said. "We are intrigued by the combination of growth, a resilient business model, positive price/margin/earnings momentum into 2022 as well as valuation support," the analysts said. The stock is listed under UBS's megatrends theme, which includes the so-called "energy transition" as well as a shift to e-commerce and new types of materials. Energy firm EDP is included for its increasing wind and solar capacity, and the analysts expect its earnings per share to grow by 22% in 2022. HSBC's top picks HSBC chose 18 favorable U.K. stocks in a research note titled "Buckets of ideas." "Much is changing, from working practices to shopping habits, labour supply, new technologies, the importance and impact on profit of ESG [environmental, social and governance] issues and the effects of the 'great wealth transfer'. These will all impact corporate profits and stock prices in coming years," HSBC's analysts led by Matthew Lloyd said in the note published Sept. 8. Under a "sustainable growth" heading, HSBC's picks include used-car website Auto Trader , which has "considerable scope to grow" with new revenue coming from financing and part-exchange, and footwear brand Dr Martens , which did "extremely well" during the pandemic. "We like the stock for its growth potential and profitability profile," the analysts said. Online fashion retailer Boohoo is also buy-rated by HSBC, which noted its new focus on sustainability and supply chain compliance after a 2020 factory-worker scandal, and its better-than-expected second-quarter trading. The bank also picked Pets at Home , which saw a boost as people bought animals during the pandemic. "Pets at Home's ability to capitalise on the growth opportunity is supported by some astute strategic moves and investments," the analysts wrote. Its "cyclical growth" picks, or those stocks that tend to follow economic cycles, include heat treatment company Bodycote — seen as likely to benefit from growth in electric vehicles — and recruitment firms PageGroup and SThree , which are both set to be more profitable due to digital processes, the bank said. Europe beating the U.S. "Continental Europe remains our key overweight," analysts at Credit Suisse said in a Sept. 8 research note, preferring the region ahead of the U.S. and Japan. The analysts led by Andrew Garthwaite like Europe for its "easier" fiscal policy, fewer wage problems and "attractive" stock valuations. Its "Top of the Crop" European ideas include chemicals firm BASF , building materials firm Holcim , energy company Schneider Electric and chemical distribution firm Brenntag . Like UBS, Credit Suisse also picked Smurfit Kappa . Credit Suisse picked drinks company Diageo as spirits become more popular than other beverages, and eyewear-maker EssilorLuxottica , for its expanding margins. "There is less threat of fiscal tightening in Europe than in any other region using IMF [International Monetary Fund] numbers, with fiscal tightening as a proportion of GDP nearly one-quarter of the fiscal tightening of the US. Moreover, fiscal tightening in Europe has an offset, namely, the winding down of furlough schemes actually boosts pay (as most of the schemes paid up to around 80% of in-work pay)," the bank said.

A range of drinking brands owned by Diageo.

Diageo | Igor Emmerich