Amid an unpredictable macro environment, quality stocks are well-positioned to outperform, according to Bernstein. Analyst Sarah McCarthy expects economic growth to slow while rates remain higher — which she believes are historically favorable conditions for high-quality stocks. “High Quality stocks are attractive against an uncertain macro backdrop. Avoiding the most expensive quintile of Quality is also attractive in an uncertain rate environment,” McCarthy said in a Thursday note. She added that quality stocks trading at a reasonable price perform similarly to quality shares unfiltered for valuation. Given this backdrop, Bernstein compiled a list of stocks that meets its quality at a reasonable price basket. These are shares falling under the top quintile of its quality model, while removing those under the most expensive quintile on forward price-to-earnings. Take a look at some of the names on the least, and where analysts see them headed next. Despite the strong tech rally in 2023, Microsoft and Meta made the list of quality stocks trading at a reasonable price. To be sure, the two stocks have some of the highest price to forward earnings ratio on the list of 30.7 and and 23.2, respectively. Microsoft shares have surged 37% year to date as excitement around generative AI boosted tech shares. Meta’s stock has also rallied 161%, with analysts estimating additional 15.5% upside, according to Refinitiv. Health care giant UnitedHealth Group also made the cut. The company has a price to forward earnings ratio of 19.7. Although shares have declined nearly 5% in 2023, analysts remain bullish on the company. More than 85% of analysts covering the stock rate it a buy or a strong buy, according to Refinitiv. The consensus price target suggests 13.6% additional upside from Wednesday’s close. UNH YTD mountain UNH in 2023 Bernstein upgraded UnitedHealth shares to outperform from market perform in July, naming it a “best-in-class managed care organization and value-based care company.” Elevance Health was another health insurance company on the list. The company has a price to forward earnings ratio of 13.8. More than four-fifths of analysts covering shares issued a strong buy or buy rating on the company, according to Refinitiv, with an estimated 21.4% upside from the previous close. Morgan Stanley also named the stock as a top pick i n a recent note. The firm forecasts Elevance’s earnings per share to grow as much as 15% next year. The stock has dropped more than 8% in 2023. —CNBC’s Michael Bloom contributed to this report.
