1. the next tech gadget
Smartphones and tablet PCs are bound to become some of the best-selling items during the holiday season as shoppers snap up the latest models, including the iPhone 5 and Galaxy Note II. What makes smart mobile devices popular is their ability to replace traditional devices thanks to their powerful computing power and sleek, portable form. Smart mobile devices can be a digital camera, a television, an e-book reader, a gaming console, a music player, or whatever apps allow them to be. With today’s faster 3G and 4G/LTE networks and more widely available Wi-Fi connections, it is easy to see how these devices have become ubiquitous.
Our “Getting smarter with mobility” investment theme banks on the continuing potential of smart mobile devices to grow globally. We expect shipments of smartphones and tablet PCs to grow 30% a year through 2016. The stocks we have selected are those likely to gain market share at the expense of weaker competitors. They are also attractively valued, with solid cash positions and nearly three times the earnings-growth potential of the global average.
Sundeep Gantori, Global IT Analyst
2. a French handbag or a German car|
Christmas or not, many consumers in the emerging markets are now eyeing top-drawer items for themselves and their loved ones. Consumers in these markets have amassed substantial purchasing power due to rising incomes. No longer content with simply having the basic necessities, they are increasingly attracted to branded products from the West.
Our “Western winners from emerging market growth” investment theme focuses on strong US and European companies whose brands are finding popularity in emerging markets. The beauty of these brands is their enviably high margins. Whatever the economic condition, marquee names are rarely sold at discounted prices, and this reflects in their earnings and stock-price performance. Our list of soughtafter brands generates at least 20% of sales from emerging markets. Backed by strong pricing power, reasonable valuations and good governance, their share prices are likely to beat the global equity benchmark. If this theme develops as we expect, next year’s Christmas package could be even bigger.
Hartmut Issel, Head, CIO WM Research APAC
3. more money in my pocket
With today’s interest rates, ordinary bank deposits are no longer the gift that keeps on giving. We think investors can do better with a strategy that makes their cash work harder through measured risks in the options market. Our “Attractive times for cash yield enhancement” investment theme focuses on generating cash yield above money-market rates. One example is through dual-currency investments (DCIs). These have become attractive since investors’ risk-aversion has increased volatility in the foreign-exchange market. DCIs are a short-term strategy that allows investors to play off the risk in the future movements of a currency pair by placing a deposit in a base currency. Then, investors can receive the principal and yield in another or the same currency.
With UBS’s offering, clients can set their desired investment amount and choose their base and alternative currencies, conversion rate and maturity. This strategy can also be used for commodities options in the right circumstances, such as when oil or metal prices are volatile. For more information, please refer to our publication Ten Golden Rules for DCI investments.
Thomas Flury, Head, Currency Research
4. a special instrument|
Few instruments can match the versatility of the guitar, which can be adapted to play different styles of music, from acoustic to Spanish flamenco to rock guitar, depending on the musician. Similarly, convertible bonds are the adaptable financial instruments that can offer similar flexibility to investors, depending on their risk profile. Our “Convertible bonds” investment theme focuses on issuers from Asia, the US and Europe that deliver good risk-adjusted returns, and are built of strong credit quality. Convertibles combine the guarantee of a regular income through interest payments and the potential capital gains when the bonds are converted into shares. They are especially attractive to investors who are not quite ready for full equity exposure, but do not want to miss it either. Current convertible bond payments compare well with savings rates, while equity valuations are attractive, making high single-digit returns achievable over the next 12 months. As always, investors should seek to diversify as they take advantage of the active pipeline for new issuance.
Philippe Mueller, Co-Head, CIO WM Research