UBS picks ‘all-weather stocks’ that can thrive in any economy, provide long-term returns

As inflation concerns remain at the forefront of investors’ minds, UBS is eyeing stocks that can find growth no matter the economic cycle. “We define compounders as all-weather stocks that leverage operational excellence and competitive advantages to grow through any phase of the economic cycle,” analyst Joseph Parkhill wrote on Tuesday. S & P 500 stocks are trading near all-time-high valuations of 20 times price to earnings and 14 times enterprise value/EBITDA, Parkhill said. “Digging in a little deeper,” he added, “valuation of higher-growth stocks appears elevated versus history with a larger percentage of stocks trading above 20x PE than history.” “Therefore, we believe you have to be selective with compounders,” Parkhill concluded. The firm screened for large-cap stocks that are all buy rated and have shown the ability to grow earnings before interest, taxes, depreciation and amortization, or EBITDA, over the past three years at a high-single digit compound annual growth rate. UBS analysts also predict these companies will accelerate EBITDA to a double-digit CAGR pace over the next three years. Here’s a look at some of the 17 stocks that UBS is watching. Amazon made the list. Stock in the e-commerce company has climbed more than 20% in 2024. “2024 should mark the first year since 2021 in which most if not all of the overhangs which beset AMZN shares will gradually lift, and all segments are moving in the same positive direction along the bull thesis,” analyst Stephen Ju said. AMZN YTD mountain Amazon stock. The analyst said shares can find strong growth thanks to expected margin expansion in e-commerce, Amazon Web Services growth picking up at a faster-than-expected clip and added revenue from advertising on Prime Video. “These factors should ultimately drive faster gross profit versus operating expense growth to drive double-digit EBITDA growth over the next several years,” Ju added. Ugg and Hoka maker Deckers Outdoor also made the cut. Shares have soared about 22% in 2024. However, a downgrade by Truist and and overall sell-off in the market sent the stock down about 7% in Wednesday’s session. UBS analyst Jay Sole expects the company to show “exceptional momentum” at its Hoka and Ugg brands, which will be a key driver in its ability to increase sales at a 15% compound annual growth rate moving forward. Sole also expects profits to improve as the company sells higher-margin products, as well as products through its direct-to-consumer channel. DECK 1Y mountain Deckers shares over the past year. “Hoka is one of the world’s fastest growing footwear brands,” Sole said. “We believe Hoka’s exceptional momentum with consumers continues and think this will lead to strong FY25 sales growth and stock-driving earnings beats.” Stocks also on the UBS list include artificial intelligence plays Microsoft and Broadcom .