UBS’s picks for global returns next year
Investors looking for global diversification opportunities should look to a specific subset of stocks in Europe, according to UBS strategists. In a note on Tuesday, strategists at the Swiss investment bank labeled 2026 the start of “Europe’s next era,” and outlined trades that could help investors capitalize on changing tides in the region. “After three long years, we finally forecast a year of earnings growth,” they said of Europe’s largest listed companies. UBS has a 600-euro year-end target price on the pan-European Stoxx 600 — which has already gained around 14% so far this year — and sees the index hitting 650 euros by the end of 2026. The 2026 target represents a premium of around 12% from Tuesday’s closing price. “The most compelling opportunities are emerging from Europe’s renewal and structural investment,” the bank’s strategists argued in their Tuesday note. “These themes are underpinned by fiscal expansion, policy support, and a shift towards domestic demand and investment.” The trend can be played, they wrote, by working to identify Europe’s emerging “international champions” and “productivity leaders” in these areas. The bank’s strategists labeled such companies “‘GOTCHA’ stocks” — an acronym for “Global Opportunities for Thematic CHAmpions.” “These ‘GOTCHA’ stocks are leveraging domestic policy tailwinds to achieve global growth,” they explained. “We highlight productivity leaders that could further benefit from AI proliferation. Key sectors at the centre of Europe’s growth upswing include banks, utilities, and select industrials, all benefiting from positive earnings revisions, strong capital positions, and the structural shifts shaping Europe’s economic landscape.” UBS has a “Buy” rating on 17 of the 29 companies it identified as GOTCHA stocks. They are: ASML , BBVA , Santander , Credit Agricole , CRH , Danske Bank , Ferrovial , Inficon , Infineon , Intesa Sanpaolo , NatWest , Orsted , Prysmian , RELX , Schneider Electric , Solaria , and Vinci . ASML In their note, UBS’s strategists suggested ASML was set to be a beneficiary of widespread AI adoption, noting the company was “exposed to AI demand in European tech hardware.” “Memory is the incremental engine from a capacity addition perspective (i.e., strong demand from AI) but also in terms of wafer fab equipment intensity with more layers on EUV and ALD benefitting both ASML and ASMI,” they said. Amsterdam-listed shares of the Dutch semiconductor equipment maker have already surged almost 30% since the beginning of the year. The company has already benefited from the AI boom, and expects sales growth of 15% this year with a gross margin of approximately 52%, but has warned of a slowdown in China in 2026 . ASML-NL YTD line ASML share price Santander Spanish lender Santander has already benefited from the 2025 bull run on European banking stocks — driven by dealmaking and improved profitability — with its shares more than doubling in value so far this year. “We expect capital build and disciplined risk-weighted asset management to underpin attractive ordinary payouts and ongoing buybacks at euro area banks,” UBS’s strategists said of Europe’s banking sector. “Bank EPS growth should accelerate (8% FY26E, 11% FY27E, with top growers at 20% or more p.a.), underpinning capital distributions for a sector trading at a 38% P/E discount to the broad equity market.” Santander is one of their top picks in the sector. SAN-ES YTD line Santander share price Solaria Shares of Spanish energy utilities firm Solaria have added more than 80% since the start of the year — and UBS believes there could be further upside ahead. SLR-ES YTD line Solaria share price “European renewables are positioned for sustained upside, driven by over €2 trillion in grid and clean-power investment,” the bank’s strategists wrote, highlighting Solaria’s “disciplined capital allocation and growth prospects”, but said “execution at key milestones remains a risk.” In the first half of its fiscal year, Solaria reported a 97% jump in net profit, and a 59% increase in revenue. The company could be poised to benefit from a continued push toward clean energy in Europe, UBS argued on Tuesday. Its strategists wrote that the European renewables sector is “positioned for multi-year upside, driven by disciplined capital expenditure, €2 trillion+ grid and clean-power investment, and rising power demand and volatility.” “Within this theme, EDP and Solaria are highlighted for their strong growth prospects … Solaria stands out for its battery-first mover advantage, though execution at upcoming milestones will be key.”
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