UBS Top Picks: 9 ASX 200 stocks to own as the RBA lifts rates

UBS is telling clients to back the companies spending on mines, data centres and defence, and to stay away from banks and consumer stocks as the RBA lifts rates.

UBS strategists Richard Schellbach and Lily Huang see two cycles emerging from reporting season, moving in opposite directions. Spending on data centres, mining, energy and defence is building a pipeline of work that UBS expects will keep supporting its overweight calls on miners and industrials. On the flip side, the strategists are underweight banks and consumer stocks, tipping rate hikes and souring sentiment to drive further EPS downgrades.

This view runs through their latest ‘Top Picks’, a list of eight to ten stocks highlighted as the most preferred ideas for the next three to six months. Since the list started on 7 September, it has fallen about 1.7% including dividends, against a 3.9% drop in the S&P/ASX 200.

Four out, three in

CSL is out after a monster move, rallying 36.5% since its FY26 result on 17 August and doubling from its 3 June low of $90.00. AMP goes too, after the stock rallied as much as 55% between 15 July and 24 September, driven by booming earnings from its China Life Pension partnership and better-than-expected FY26 results. Genesis Minerals was cut on concerns that risk-free real interest rates have structurally stepped up. Auckland Airport was removed ahead of next month’s New Zealand general election, although UBS’s analyst is still positive on the stock.

BHP, Charter Hall and Insurance Australia Group are now on the list, which runs to nine names.

All Buy-rated except BHP. Upside includes forecast dividends. Source: UBS estimates

The rate-hike case

UBS argues two of the new additions can hold up through the current rate-hike cycle.

Charter Hall (CHC) trades on 15.8x forward earnings, a discount to the ASX 200’s 18x, yet the analysts forecast 13% EPS growth in FY27 against 8% for the broader market. They point to a higher share of recurring earnings, steady institutional capital flows and momentum carried over from FY26. Rising bond yields have dragged the stock 16% lower over the past three months, but UBS expects the November AGM to reaffirm FY27 guidance for 10.5% growth and bring positive commentary on capital raising.

Food for thought: Charter Hall shares tanked some 60% during the 2022–23 rate-hike cycle. In a separate piece of research, UBS argues this time is different. Heading into 2022–23, a large chunk of CHC’s earnings came from performance fees, which are lumpy and tend to vanish when property values stop rising. Meanwhile, today’s earnings lean far more on recurring funds management fees, so there’s less of a cliff to fall off. The current hiking cycle is also expected to be far less aggressive than the 400 bps of hikes endured in 2022–23.

IAG (IAG) is UBS’s top pick among the insurers as home and motor premiums rise at a mid-single-digit pace, and the structure of its reinsurance and catastrophe budgets gives margins more room to surprise to the upside. The higher bond yield environment is another plus for the sector. There’s also the RAC acquisition, which UBS says can bring about further upside, or a potential buyback if the deal is blocked. The ACCC’s Phase 3 review is due by the end of 2026.

Copper and contractors

BHP (BHP) is the only Neutral-rated stock on the list, with a $62.00 target. There’s not a whole lot of upside, but it earns its place through copper, which accounted for 54% of group EBITDA in FY26 and is expected to reach about 55% in FY27. Copper is UBS’s preferred commodity, and the analysts expect prices to stay elevated for an extended period.

Food for thought: Despite being universally bullish on copper, analysts are fairly flat on BHP, given the stock is up almost 50% in the past 12 months and trades at a forward EBITDA multiple of 7x. Macquarie, for instance, has shifted its preference to Rio Tinto, which trades at a forward EBITDA multiple of just 5x and offers equally solid medium-term copper growth via its Oyu Tolgoi project.

Orica (ORI) and Ventia (VNT) are viewed as cheaper ways into the capex trade. Orica trades at about a 10% discount to the ASX 200 industrials on one-year forward earnings, and UBS forecasts 7% annual EPS growth from FY25 to FY28, underpinned by mine production, a tight ammonium nitrate market and recent acquisitions. A longer-term resolution of US ammonium nitrate supply could also drive a re-rating.

Ventia trades about 18% below the ASX 200 industrials and around 8% below global capital-light industrial services peers. UBS forecasts 8% annual EPS growth over three years, driven by infrastructure investment, government outsourcing and defence spending. Its estimated 4.5% FY27 yield is also the highest on the list.

Big upside picks

Light & Wonder (LNW) has the most upside at 89%. It trades on about 11x forward earnings and has reiterated FY26 guidance for mid- to high-single-digit adjusted EBITDA growth. UBS says it shares many of Aristocrat’s industry dynamics, including steady gaming revenue, demand for premium leased content and iGaming growth. Yet Aristocrat trades on a forward PE of around 23x. That gap is why analysts remain universally bullish on Light & Wonder. In theory, it should start to close as more evidence of improved game performance comes through.

Megaport (MP1) is the most expensive stock on the list, at 84.3x FY27 earnings. UBS says the Latitude business (acquired in Nov-25 for up to US$300m) is changing the earnings profile through long-duration AI compute contracts and faster ARR growth. Contracted EBITDA already sits at $650 million before any contribution from its GPU pool or further network growth. It's worth noting that UBS was the joint lead manager on Megaport’s $825 million equity raise and will be paid a fee for the role.

Sigma Healthcare (SIG), which owns Chemist Warehouse following its 2025 merger, is also one of the more expensive names on the list. It trades on 36.2x FY27 earnings, though that’s backed by expected EPS growth of 17.4%. UBS points to like-for-like sales and new store growth across Chemist Warehouse in Australia and overseas, along with growth in back-of-store and health and beauty, and gross margin expansion.

Mineral Resources (MIN) has fallen 14.9% over three months and is the list’s worst performer since inception. UBS has kept it on the list, arguing the diversified miner is entering a cash-harvest phase that should help pay down debt and lift shareholder returns. The analysts also believe governance concerns around executive misconduct have eased, with a credible succession plan now in place.