Why growth investors should back financials

ON THE US

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The US market rally has been led by bond-like stocks with consumer staples leading the way. These stocks have little upside now, argues UBS's Tom Digenan, and investors would be wiser to give financials another look.

The US equity market moved higher in the third quarter, and investors’ main concern during the period was the potential tapering of the Fed’s ongoing quantitative easing (QE) programme. In our opinion, equity valuations are not as attractive as they were earlier on in the year, with more stocks trading at prices closer to our estimates of their true value. However, we still see a number of opportunities available for value investors. Earnings per share are forecast to grow by double digits in 2013 and 2014 as companies continue to bring marginal revenue growth to the bottom line. A...

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