Load Up, Says UBS: Two 'Strong Buy' Stocks for Income Investors

UBS, a leading global financial institution, has recently upgraded two stocks to 'Strong Buy,' presenting an opportunity for income-focused investors. These stocks, Nvidia (NVDA) and Microsoft (MSFT), offer compelling growth prospects and stable income streams. This article explores the fundamentals of these stocks, their alignment with UBS's bullish outlook, and their fit within an income-focused investment strategy.

Nvidia (NVDA) is a key player in the artificial intelligence (AI) sector, which has seen a surge in investment due to the 'AI arms race' driven by ChatGPT. Its earnings have been stronger than expected, and UBS believes that AI is a game-changer that will have a significant impact on productivity and earnings growth. NVDA's robust fundamentals, with a 5-year EPS growth rate of 24.5% and a dividend yield of 1.5%, make it an attractive choice for investors seeking growth and income.

Microsoft (MSFT) is another 'Strong Buy' stock recommended by UBS. Its earnings have also been stronger than expected, driven by its diverse revenue streams, including cloud services, productivity tools, and gaming. MSFT's strong balance sheet and substantial free cash flow generation make it an appealing investment for income-focused portfolios. With a 5-year EPS growth rate of 16.5% and a dividend yield of 0.8%, MSFT offers a stable income stream with growth potential.


UBS's expectation of three rate cuts in 2024 could further boost the performance of these stocks. Lower interest rates typically lead to lower borrowing costs for companies, which can enhance earnings and cash flows. This, in turn, could drive up stock prices and make bonds less attractive, potentially drawing more investment into equities. Therefore, UBS's rate cut expectation could provide a tailwind for these stocks, enhancing their appeal to investors.

These 'Strong Buy' stocks' earnings guidance and recent results support UBS's bullish outlook. The S&P 500 has rallied 19% in 2023, driven by a resilient US economy, falling inflation, and enthusiasm for AI-related stocks. UBS expects global growth to cool in 2024 but sees moderate upside in equities. The bank favors quality stocks, including the US IT sector, which should be well-positioned to generate earnings in a slower growth environment. Regionally, UBS likes emerging market equities, forecasting 16% earnings growth for the MSCI Emerging Markets index in 2024.


In conclusion, UBS's 'Strong Buy' recommendations for Nvidia (NVDA) and Microsoft (MSFT) present an attractive opportunity for income-focused investors. These stocks offer compelling growth prospects, stable income streams, and alignment with UBS's bullish outlook. As the market continues to evolve, investors should consider these stocks as part of a diversified, income-focused portfolio.