UBS has uncovered small- and medium-sized overlooked stocks across Europe that offer substantial upside potential. The investment bank screened over 2,500 stocks based on four key factors: non-inclusion in major indexes like the Stoxx 600 and FTSE 100 ; strong value and quality scores; positive price momentum over the past year; and relatively few short positions. Using its proprietary filters, the bank said it found 23 stocks spanning 15 industries and 11 countries that offer an “excitement of discovery and the potential for substantial growth” in a research note to clients on Feb. 14 titled “SMID’n for SMIDs: Unloved and Undervalued Stock Picks.” “While they do not always receive the same attention as their larger counterparts, [small and mid caps] have the charm of being hidden gems, waiting to be uncovered by savvy investors keen to make their portfolios bloom,” wrote UBS’ associate strategist Sutanya Chedda. Of those, the five stocks below stand out for having the biggest upside potential, according to FactSet’s consensus price targets. The five stocks had a high UBS “composite value score,” indicating they are cheap relative to their book value. They also had high “quality scores.” On top of that, the share prices of those stocks rose over the past 12 months, which means they have “momentum” behind them. Finally, UBS screened for stocks with a relatively low short-selling in them — the practice of betting on the stocks falling. The bank had previously said small- and mid-cap companies are a “preferred” segment for investing in 2024. — CNBC’s Michael Bloom contributed to this report.
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