UBS Identifies Attractive Defensive Stock Opportunities
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Source: CNBC
- Market Concentration Analysis: According to UBS, the market experienced strong gains in the first half of the year, primarily driven by a handful of megacap tech companies, leading to historically low correlations across stocks, indicating that investors are avoiding lower-risk companies, which has made many defensive stocks attractive in valuation.
- Valuation Gap in Defensive Stocks: Analyst Sean Burns highlighted that the gap between expensive and cheap defensive stocks is near the widest levels seen since 1990, nearly double the long-run average, with low-risk stocks trading at a market-implied yield of 4.4% compared to just 1.4% for high-risk stocks.
- Quality Defensive Stock Screening: UBS screened for defensive stocks with a market cap of at least $5 billion and a negative correlation to the S&P 500 over the past year, finding that these stocks not only exhibit low volatility but are also trading at discounts, all rated as buys by UBS.
- Individual Stock Performance Expectations: For instance, PepsiCo (PEP) is down about 6% year-to-date but is expected to report strong second-quarter earnings, with its North American food business recovering volume growth after price cuts; McDonald's (MCD) also beat first-quarter earnings expectations and is expected to continue gaining market share globally.
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Analyst Views on PEP
Wall Street analysts forecast PEP stock price to rise
12 Analyst Rating
6 Buy
6 Hold
0 Sell
Moderate Buy
Current: 141.160
Low
144.00
Averages
161.90
High
172.00
Current: 141.160
Low
144.00
Averages
161.90
High
172.00
About PEP
PepsiCo, Inc. is a global beverage and convenient food company. The Company’s segments include PepsiCo Foods North America (PFNA), PepsiCo Beverages North America (PBNA), International Beverages Franchise (IB Franchise), Europe, Middle East and Africa (EMEA), Latin America Foods (LatAm Foods), and Asia Pacific Foods. PFNA segment includes all of its convenient food businesses in the United States and Canada. PBNA segment includes all of its beverage businesses in the United States and Canada. IB Franchise segment includes its international franchise beverage businesses, as well as its SodaStream business. EMEA segment includes its convenient food businesses and beverage businesses with Company-owned bottlers in Europe, the Middle East and Africa. LatAm Foods segment includes all of its convenient food businesses in Latin America. Asia Pacific Foods segment consists of its convenient food businesses in Asia Pacific, including China, Australia and New Zealand, as well as India.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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