‘High growth, low risk, high quality’: Bank of America backs these global stocks

Published Wed, Sep 22 20217:15 PM EDT

Bank of America analysts have picked a raft of "top" European stocks they say are high growth, low risk and high quality, as they warn of an economic slowdown. The analysts believe the market is entering the next phase of the economic cycle. It comes as the recent boom — bolstered by government stimulus designed combat the effects of the coronavirus pandemic — starts to fade, BofA said in a research note published Sept. 16. The European Central Bank, for instance, said it will slow down bond buying under its pandemic stimulus program earlier this month . "In 'Slowdown', we prefer Growth over Value as well as High Quality, Low Risk, High Size and Rising Momentum," the analysts wrote. "Investors are not yet positioned for this outcome … nor do they believe that these styles will outperform over the coming 12 months." So-called growth stocks are expected to rise at a faster rate than the rest of the market, but could be more risky. Value stocks, on the other hand, are viewed as undervalued and are expected to benefit from economic growth. Stock picks In its list of "High Growth, Low Risk, High Quality & Large Size" stocks, BofA's picks include luxury groups Hermes , Kering and LVMH as well as beauty giant L'Oreal . The analysts also picked semiconductor supplier ASML and autonomous tech company Hexagon . In manufacturing, top stocks included Atlas Copco and Spirax-Sarco . In the pharmaceuticals sector, the analysts included Sartorius Stedim Biotech and Novo Nordisk , while in transport they picked DSV Panalpina and Deutsche Post . Beverage company Diageo and sportswear brand Adidas also made BofA's top stocks list, along with data company Experian and security firm Assa Abloy . Broad-based slowdown The Bofa analysts listed a number of macroeconomic indicators they said pointed to an "increasingly broad-based slowdown," including purchasing managers' indexes. "Sentiment surveys (PMIs) … point to a declining number of countries where growth is still accelerating," they wrote. The PMI, or Purchasing Managers' Index, refers to data collected by research firm IHS Markit and gives an indication of activity in manufacturing and services. Its flash composite PMI for the euro zone reached a two-month low of 59.5 in August – anything above 50 represents economic growth. "Despite the increasingly wide-spread macro slowdown, only a quarter of investors think that the global recovery is already in its late-cycle phase," the analysts noted. - CNBC's Silvia Amaro contributed to this report.

A pedestrian carries a Louis Vuitton shopping bag, from a store operated by LVMH Moet Hennessy Louis Vuitton SE, on New Bond Street in London, U.K., on Wednesday, Oct. 21, 2020.

Hollie Adams | Bloomberg | Getty Images

Bank of America analysts have picked a raft of "top" European stocks they say are high growth, low risk and high quality, as they warn of an economic slowdown.