UBS picks 10 global stocks set to rally on a $1 trillion pandemic spending boom

Published Tue, Oct 19 20217:13 PM EDT

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

Analysts at UBS have named the global stocks they say will benefit from shoppers spending more than $1 trillion they've saved during the coronavirus pandemic — and 10 of them have at least 30% upside potential. "Our European economics team estimates that across the Eurozone and the UK there is now c.€1trn [$1.16 trillion] of excess savings built up over the pandemic. We see this as a key driver of equity markets," the analysts led by Nick Nelson said in an Oct. 11 research note. The bank's Evidence Lab surveyed 5,000 consumers in the U.K. and Europe between Sept. 6 and 14 asking about their spending intentions. "The categories that are likely to see the highest increase in consumer spending are holiday / travel spend, fuel, car purchases and housing improvements," the analysts said. "In particular we would focus on names in the top 5 categories for increased spending in the survey — such as travel spend ( IAG ), purchase of vehicles ( Volkswagen ) housing related ( Taylor Wimpey ) and transport ( National Express , Stagecoach )," the bank stated. Volkswagen topped the list of potential beneficiaries from European consumers' excess savings, with a 57% potential upside to UBS's 12-month price target, while fellow automaker Stellantis has 51%. British Airways-owner IAG has an estimated 44% potential upside, while housebuilder Taylor Wimpey has 48%. Bus companies National Express and Stagecoach have 52% and 45% upside potential respectively, according to UBS. Consumer companies also make UBS's list, including sportswear firm Adidas (with a potential 39% upside), Prada (36%) and luxury group Richemont (31%). Household products company Reckitt Benckiser has a potential 39% upside to UBS's price target. The bank compared its findings with a similar survey from April. "Restaurants / bars implied spending has fallen, maybe in reaction to the fact that restaurants across Europe have already been broadly open over the last 6 months. Implied spending on Health is also down from the April survey, perhaps as individuals believe we are coming closer to the end of the pandemic," the analysts stated. Overall spending intentions are down around 3 percentage points from the previous survey, the bank added. "That may be because some of the initial spending was completed over the summer as European countries emerged from lockdown. Nonetheless, the pent up excess savings suggests this could be a theme for a while," the analysts said.

Cars in a factory production line.

Monty Rakusen | Image Source | Getty Images