Investment bank picks U.S. and global stock ‘winners’ to beat uncertainty

Published Tue, Sep 21 20214:30 PM EDT

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

Analysts at Berenberg have named the stocks they expect to do well, regardless of economic or political uncertainty. Their top picks include companies across tech, retail and the auto sector. "Equity investors have been on a rollercoaster ride over the past two years. Since March 2020 lows, they will have enjoyed bumper returns," the analysts wrote in a Sept. 16 research note. Berenberg expects the economic recovery to continue into next year, along with rising bond yields and inflation, which they said would underpin an "extending earnings cycle." The analysts also noted a few near-term risks and "the potential for a spike in uncertainty over the next couple of months." These risks included weaker activity in China, disruptions due to Covid-19 and a reduction in the financial support from central banks. With this in mind, the analysts picked what they called "whatever weather winners" — stocks with expectations of strong earnings growth and balance sheets and surplus free cashflow yield, a measure investors use to assess a company's cash generation and potential for growth. These are stocks "for now," the bank said, and their picks include those in Europe, the U.S. and U.K. Tech stocks Berenberg called tech "the ultimate whatever weather winner sector," and has been overweight the sector since March 2011, after the global financial crisis. Its U.S. picks include tech giants Facebook and Amazon , as well as computer suppliers Micron Technology , Western Digital and semiconductor firm Marvell Technology . Small to mid-sized tech firms on its list include LED company Universal Display , laser manufacturer IPG Photonics and IT firm DXC Technology . European tech picks include semiconductor suppliers ASML and Infineon , and semiconductor manufacturer ASM International , while in the U.K. it picked software consultancy Aveva Group and used-car website Auto Trader . More than 60% of global tech stocks have net cash on their balance sheets, Berenberg said, as well as over 40% expected growth in earnings per share in three years' time, compared to one year's time. Earnings per share is used by investors as a key measure of a stock's performance. Further picks Along with tech, Berenberg's analysts like autos, energy and retailers, which "appear to have strong near and medium term EPS growth expected." Its large-cap U.S. "whatever weather winners" in these sectors include Ford , auto suppliers Borgwarner and Aptiv , and fashion retailer Ross Stores . The energy firms on its list are Pioneer Natural Resources and Baker Hughes . Small- to mid-sized company picks include auto suppliers Lear and Autoliv . In Europe, the analysts' favorites include luxury group Kering , fashion retailer H & M and used-car seller Motorpoint , as well as tire firms Michelin and Continental and auto glass company D'Ieteren Group .

Amazon boxes are seen stacked for delivery in New York City.

Mike Segar | Reuters

Analysts at Berenberg have named the stocks they expect to do well, regardless of economic or political uncertainty. Their top picks include companies across tech, retail and the auto sector.