Several investment banks are urging caution as the stock market continues its rally despite a worsening economic backdrop. Morgan Stanley earlier this month predicted that European markets would decline by 10% this summer. The Wall Street bank’s chief strategist even warned that there are ” signs of panic buying ” among investors. Then, UBS said in a report titled “Don’t be fooled by the latest Tech rally” on June 6 that hedge funds have already begun selling $20 billion to $30 billion worth of global stocks. Wells Fargo’s head of global market strategy has also raised the alarm by saying ” markets are too complacent ” at the current level. To that end, CNBC Pro screened over 3,330 large and mid-cap global equities that are part of the FTSE All-World ex-U.S. Index and identified the 13 stocks that analysts are most bearish toward. Sophisticated investors often look to make investment gains by short-selling a stock that is expected to decline. Short selling is the practice of borrowing shares and selling them with the plan to repurchase at a cheaper price and profit from the difference. It’s a strategy commonly used by hedge funds. The table below shows global stocks, covered by at least 10 analysts, with no buy, overweight, or outperform ratings. Vodafone Idea India-listed Vodafone Idea is the most unloved stock in the above table. The majority of the 14 analysts covering the stock have a sell, underweight, or underperform rating on it, with the average price target pointing toward a 30% fall from current levels, according to FactSet data. The telecom operator has reported significant subscriber losses to local upstart Reliance Jio over the years, with analysts citing high pricing, lack of investment and poor strategy. Now, as rivals transition to the new 5G network standard, Vodafone Idea has been unable to raise funds for the investment needed. Vodafone Idea “continues to struggle to close the fund raise that is critical to drive 5G as well as 4G capex and repay vendor dues,” said JPMorgan analyst Ankur Rudra in a note to clients on May 28. He has an underweight rating on the stock. “A fund raise remains critical to improve competitiveness as delay in 5G capex would put IDEA on the back foot with high [average revenue per user] vs. peers that have begun rolling out 5G services, in our view,” Rudra added. Shares of the company have fallen by nearly 20% this year. Acer Taiwan-headquartered laptop and PC maker Acer has the biggest potential downside in the above table, with a 31% fall from current prices expected by analysts, according to targets compiled by FactSet. However, unlike Vodafone Idea, the downside risk is mainly given the stock’s recent rally toward its all-time high. The company’s management told investors last month that the downturn in computer sales had ended in the first quarter of this year. Morgan Stanley analysts agree and expect the company to see early signs of a pickup in new orders. “Inventory digestion will normalize by late [second quarter] for Acer, but management says visibility for 2024 is still unclear – it’s too early to comment,” said Morgan Stanley’s analyst Howard Kao in a note to clients on May 16. Kao has an equal-weight or hold rating on the stock. — CNBC’s Michael Bloom contributed to this report.
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