The ASX stocks UBS has a ‘buy’ rating on in the wake of the COVID-19 disruption
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The COVID-19 crisis has resulted in plenty of portfolio repositioning, as investors try and hitch a ride to some unexpected tailwinds that have arisen.
In that environment, analyst Pieter Stoltz and the equity research team at UBS released a useful note on the subject this week.
Looking more broadly at all the sectors directly impacted (both positively and negatively) by the pandemic, they then dialled in on which stocks are best-placed to outperform.
The analysts highlighted stocks across seven new COVID-19 related categories:
– Stocks with exposure to COVID-19 hotspots (Victoria and NSW);
– Stocks with exposure to the China rebound; and
– Demand factors: winners and losers from 1. short-term demand shocks, and 2. structural demand shifts.
For each sector they applied a Buy, Sell or Neutral rating for each of the ASX stocks that meet the above criteria.
Breaking down the analysis further, we’ve highlighted a list of stocks from the relevant sectors below that have a UBS “Buy” rating.
Stocks highlighted in yellow also take up an “Overweight” position in the UBS Model Portfolio.
Scroll or swipe to reveal table. Click headings to sort:
|China rebound||SGM||Sims||Metals & Mining|
|China rebound||A2M||a2 Milk Company||Consumer staples|
|China rebound||IEL||IDP Education||Discretionary Retail|
|China rebound||BHP||BHP||Metals & Mining|
|China rebound||SM1||Synlait Milk||Consumer staples|
|China rebound||FMG||Fortescue Metals||Metals & Mining|
|NSW exposure||CSR||CSR||Other materials|
|NSW exposure||ANZ||ANZ Bank||Banks|
|NSW exposure||SGR||Star Entertainment||Gaming|
|NSW exposure||VRT||Virtus Health||Health Care|
|NSW exposure||BIN||Bingo Industreis||General Industrials|
|NSW exposure||IAG||Insurance Australia||Insurance|
|NSW exposure||BLD||Boral||Other materials|
|NSW exposure||HVN||Harvey Norman||Discretionary Retail|
|NSW exposure||CWN||Crown Resorts||Gaming|
|NSW exposure||DHG||Domain Australia||Media|
|NSW exposure||ADH||Adairs||Discretionary Retail|
|Victoria exposure||ANZ||ANZ Bank||Banks|
|Victoria exposure||IAG||Insurance Australia||Insurance|
|Victoria exposure||HVN||Harvey Norman||Discretionary Retail|
|Victoria exposure||CWN||Crown Resorts||Gaming|
|COVID-19 demand boost||WOW||Woolworths||Consumer staples|
|COVID-19 demand boost||MTS||Metcash||Consumer staples|
|COVID-19 demand boost||HVN||Harvey Norman||Discretionary Retail|
|COVID-19 demand boost||CKF||Collins Foods||Discretionary Retail|
|COVID-19 demand boost||RMD||ResMed Inc||Health Care|
|COVID-19 demand shock||ALL||Aristocrat Leisure||Gaming|
|COVID-19 demand shock||SXL||Southern Cross Media||Media|
|COVID-19 demand shock||CTM||Corporate Travel||Discretionary Retail|
|COVID-19 demand shock||WEB||Webjet||Discretionary Retail|
|COVID-19 demand shock||GEM||G8 Education||Discretionary Retail|
|COVID-19 demand shock||TAB||Tabcorp||Gaming|
|COVID-19 demand shock||MGR||Mirvac||REITs|
|COVID-19 demand shock||NEC||Nine Entertainment||Media|
|COVID-19 demand shock||SVW||Seven||General Industrials|
|COVID-19 demand shock||CWN||Crown Resorts||Gaming|
|COVID-19 demand shock||PMV||Premier Investments||Discretionary Retail|
|COVID-19 structual demand||BAP||Bapcor||Discretionary Retail|
|COVID-19 structual demand||AMA||Ama||Discretionary Retail|
|COVID-19 structual demand||CNI||Centuria Capital||Other Financials|
|COVID-19 structual demand||CHC||Charter Hall||REITs|
|COVID-19 structual demand||NXT||NextDC||Tech|
|COVID-19 structual demand||APX||Appen||Tech|
|COVID-19 structural decline||QAN||Qantas||General Industrials|
|COVID-19 structural decline||SYD||Sydney Aiport||Infrastructure|
The analysis clearly shows that despite the hit to Australia’s banking sector, UBS is optimistic Australia’s major banks can still outperform as the domestic economy emerges from the pandemic.
And even though there are plenty of ASX stocks with exposure to the negative demand effects from COVID-19, UBS is still optimistic about their ability to rebound.
The analysts put a Buy rating on no less than 11 companies in the “COVID-19 demand shock” category.
They also highlight the potential resilience of gaming stocks, despite the lingering COVID-19 risks hanging over the NSW economy (Star Entertainment) and the effect of social distancing restrictions (Aristocrat Leisure).
The UBS team also put the spotlight on six companies that are set to benefit from structural demand changes in the wake of the pandemic, including the rise of online retail.
Outside of the COVID-19 impact, the analysts provided a breakdown of other ASX-relevant themes, such as the ongoing environment of low interest rates which is typically beneficial for defensive growth stocks and income (stable dividend) plays.
UBS also has a Buy rating on four mining services stocks, as part of a positive resources environment where commodity prices have so far held up during the pandemic.
In particular, they pointed to a “sharp increase” in forward-looking estimates of capital expenditure by ASX200 resources companies since the start of the year.
“If commodity prices hold up and these capex forecasts materialise, this could lead to an upswing in mining activity and benefit the stocks in the mining services theme,” UBS said.