Investment banks love these 'cheap' global stocks they say are set to outperform

Published Thu, Mar 31 20227:56 PM EDTUpdated Fri, Apr 1 202210:16 AM EDT

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

Analysts from three investment banks pick a slew of "cheap" global stocks they expect to outperform the market — and some are down 60% from 12-month highs. JPMorgan 's "cheap" picks are all in finance. "Sector looks cheap, earnings are improving, and it stands to benefit from rising bond yields," the bank's analysts wrote in a March 28 note to investors. The analysts are overweight Lloyds Banking Group , Frankfurt Stock Exchange operator Deutsche Boerse and Italian banking group Intesa Sanpaolo . A growing number of economists have warned of a recession risk given the Federal Reserve's interest rate hike this month, but JPMorgan said these fears are overblown. "We think it is wrong to position for a recession given still extremely favourable financing conditions, very strong labour markets, underleveraged consumer, strong corporate cash flows and banks' strong balance sheets," the analysts, led by Mislav Matejka, stated. 'Cheap' stocks from Credit Suisse Credit Suisse's list of "cheap," outperform-rated stocks also have positive earnings revisions. All of its picks are small- to medium-sized firms with market cap less than $5 billion. It said U.S. small cap companies had outperformed larger firms since 1926, according to its Global Investment Returns Yearbook, and described smaller firms as "the place to be," in a March 29 note to investors. U.S. picks include real estate firms Cushman and Wakefield and Essential Properties , food manufacturers Hostess Brands and The Simply Good Foods Co , and financial firms Mr Cooper Group and BGC Partners . Credit Suisse also chose water services firm Core & Main , IT company Verra Mobility , transport manufacturer Vontier and grill-maker Traeger . In Europe, the bank picked real estate firms Glenveagh Properties and Instone Real Estate Group , steel producer Aperam and Spanish solar power operator Solaria Energia . Broadband company Telenet Group , security services firm Securitas and Finnish crane manufacturer Konecranes also made its cheap stocks list. Bigger bears Hong Kong-based investment firm CLSA said there are buying opportunities in "triple bears" — or stocks the bank says are down more than 60% from 12-month highs. In a research note dated March 25, it identified $16 billion Chinese vaping company Smoore as a triple bear after a 70% fall from its 12-month high and rated it a buy. "We maintain our BUY rating on an attractive valuation … and are positive on its mid-term growth outlook," CLSA wrote. Singapore-headquartered Sea Limited , parent company of games publisher Garena and e-commerce platform Shopee, has seen its stock fall 66.6% from its 12-month high, and is buy-rated by CLSA. "SEA remains one of the best ways to gain exposure to Asean's [south-east Asia's] ecommerce sector," the analysts stated. CLSA also named a number of "double-bear" stocks — which have fallen between 40% and 60% from their 12-month highs, according to the bank. Internet giant Alibaba is down more than 55%, CLSA said, and while it faces pressure from macro concerns such as a weak economy and Covid-19 lockdowns, the business is "solid for economic turnaround." Chinese companies have seen a selloff as the U.S. Securities and Exchange Commission said some U.S.-listed stocks are at risk of delisting . Smartphone-maker Xiaomi is down 55%, according to CLSA, but it is also buy-rated on the stock, due to its "growing share in the high-end market." Also on CLSA's list is Samsung SDI , a "bear-and-a-half" stock that is down 38.3% on its 12-month high. "Risk-reward for Samsung SDI looks attractive given improving earnings visibility and further upside to global market share based on its competitive advantage in premium [battery] cells," the analysts stated. - CNBC's Evelyn Chen contributed to this report.

Traders at the NYSE, March 8, 2022.

Source: NYSE

Analysts from three investment banks pick a slew of "cheap" global stocks they expect to outperform the market — and some are down 60% from 12-month highs.