MW Now that trade deals are getting done, here's why this out-of-favor stock-market strategy may shine.

By Steve Goldstein

UBS identifies 29 growth-at-reasonable-prices stocks

About a month after "Liberation Day" and the huge tariffs announced that day are now a distant memory, as tariffs between the U.S. and China were each largely rolled back. More on that later.

UBS strategists led by Sean Simonds have a timely note about how the questions will now focus less on policy uncertainty and more on outcome uncertainty. "We are possibly past the peak of uncertainty as more granular detail on tariffs and other policies come into focus," they say. "What comes after this, however, is the policy OUTCOME uncertainty," with the capitalization the choice of the authors.

The UBS team's assumptions were based on 10% universal tariffs and 60% on China - the latter of which is now double the actual tariff level, but given sector tariffs as well, probably a reasonable starting point as to guessing the economic implications. Their assumption is the U.S. economy will slow from a 2% year-over-year rate in the first quarter to 0.7% by the fourth quarter.

"Elevated, but uncertain volatility/risks suggest a value orientation (avoiding high valuations). However, the potential for continued economic momentum into 2026 suggests keeping exposure to some cyclical growth companies," the UBS team say.

So what's the right strategy? UBS suggests growth at a reasonable price. Granted, that's not a strategy that has worked recently: the Invesco S&P 500 GARP ETF GARP, for instance, has underperformed the broader S&P 500 SPX this year, over the last 52 weeks and the last three years.

"Growth at a reasonable price $(GARP)$ investing became a lot more difficult in the last decade as valuations expanded and a narrower set of companies were able to generate consistent growth. After the recent derating and with economic transitions underway, we think GARP may find renewed interest," they say.

They produced this list of 29 stocks they think meet the criteria - on average, the companies trade at 30 times estimated 2025 earnings with a 19% expected return from UBS analysts. Tapping a valuation database called HOLT it inherited from Credit Suisse, the strategists said all of the stocks are in the top half of the market on operational quality, in the top quarter on growth and neither a value trap or too expensive, as well as being over $10 billion in market cap.

The list ranges from well-known companies like Broadcom $(AVGO)$ to On Holdings $(ONON)$, the Swiss sneaker maker backed by tennis star Roger Federer.

   Ticker                       Name                          Industry                         2025e PE  2026e PE  Price chg (since 31-Dec) 
   AVGO                         Broadcom Inc                  Semiconductors & Semiconductor   32        27        -10% 
   LLY                          Eli Lilly & Co                Pharmaceuticals, Biotechnology   53        43        -2% 
   CRM                          Salesforce Inc                Software & Services              28        25        -16% 
   NOW                          Servicenow Inc                Software & Services              59        49        -8% 
   INTU                         Intuit Inc                    Software & Services              34        30        5% 
   BKNG                         Booking Holdings Inc          Consumer Services                24        21        4% 
   PGR                          Progressive Corp              Insurance                        18        18        21% 
   ETN                          Eaton Corp Plc                Capital Goods                    26        23        -7% 
   ANET                         Arista Networks Inc           Technology Hardware & Equipment  34        29        -21% 
   APH                          Amphenol Corp-Cl A            Technology Hardware & Equipment  30        28        16% 
   KLAC                         Kla Corp                      Semiconductors & Semiconductor   22        21        12% 
   CTAS                         Cintas Corp                   Commercial & Professional Serv   49        44        18% 
   EQIX                         Equinix Inc                   Equity Real Estate Investment    61        54        -8% 
   CMG                          Chipotle Mexican Grill Inc    Consumer Services                42        35        -15% 
   ADSK                         Autodesk Inc                  Software & Services              35        30        -2% 
   HLT                          Hilton Worldwide Holdings In  Consumer Services                31        27        -2% 
   IDXX                         Idexx Laboratories Inc        Health Care Equipment & Servic   40        36        19% 
   HEI                          Heico Corp                    Capital Goods                    60        54        13% 
   TW                           Tradeweb Markets Inc-Class A  Financial Services               43        38        11% 
   ROL                          Rollins Inc                   Commercial & Professional Serv   52        46        5% 
   TYL                          Tyler Technologies Inc        Software & Services              50        45        -2% 
   VLTO                         Veralto Corp                  Commercial & Professional Serv   26        24        -4% 
   EME                          Emcor Group Inc               Capital Goods                    19        17        -3% 
   RYAN                         Ryan Specialty Holdings Inc   Insurance                        31        26        9% 
   ONON                         On Holding Ag-Class A         Consumer Durables & Apparel      41        32        -9% 
   EQH                          Equitable Holdings Inc        Financial Services               8         6         18% 
   BSY                          Bentley Systems Inc-Class B   Software & Services              40        35        10% 
   MANH                         Manhattan Associates Inc      Software & Services              41        37        -31% 
   KNSL                         Kinsale Capital Group Inc     Insurance                        26        22        -2% 
   Data: UBS/FactSet/Bloomberg 

The markets

A big day in financial markets is shaping up: Futures on the Dow (YM00) are up nearly 1,000 points as S&P 500 (ES00) and Nasdaq 100 (NQ00) contracts rally. Gold (GC00) is tumbling. The yield on the 10-year Treasury BX:TMUBMUSD10Yrose 4 basis points.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              5659.91    -0.47%  5.53%   -3.77%   8.37% 
   Nasdaq Composite                                                     17,928.92  -0.27%  7.20%   -7.16%   9.72% 
   10-year Treasury                                                     4.445      9.60    6.70    -13.10   -4.80 
   Gold                                                                 3219.3     -3.71%  -0.23%  21.98%   37.44% 
   Oil                                                                  62.89      9.89%   2.16%   -12.49%  -20.59% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

The U.S. and China, after trade talks in Geneva, agreed to cut tariffs on each other by 115 percentage points, for at least 90 days. Treasury Secretary Scott Bessent further added that talks on fentanyl, where tariffs on China remain in place, were positive.

President Donald Trump over the weekend said he'll sign an executive order putting "most favored nation" status on drug prices, a move that's only expected to impact government-run health programs.

Eli Lilly said its Zepbound drug led to superior weight loss than Novo Nordisk's Wegovy in a Phase 3b trial.

India and Pakistan signed a U.S.-brokered ceasefire deal.

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The chart

Morgan Stanley plotted this chart of "inflation" mentions on U.S. corporate conference calls, taken from AlphaSense data, versus the year-over-year inflation rate. The next consumer price index report is due for release on Tuesday.

Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   AAPL    Apple 
   PLTR    Palantir Technologies 
   AMZN    Amazon.com 
   AMD     Advanced Micro Devices 
   TSM     Taiwan Semiconductor Manufacturing 
   META    Meta Platforms 
   MSTR    MicroStrategy 

Random reads

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-Steve Goldstein

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May 12, 2025 06:45 ET (10:45 GMT)

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