UBS's basket of expensive stocks faces derating risks

[Emerging Financial Data - Stock Market, Prosperity, Bull Market - Blue Version] DKosig UBS equity strategists have constructed a 56-stock "expensive fundamentals" basket targeting companies with elevated valuations, below-average cash flow returns, and lagging growth profiles that face derating risk if earnings momentum weakens. The basket comprises liquid U.S. equities that trade at an average 12-month forward price-to-earnings multiple of 23x despite generating average sales growth of just 5% and cash-flow returns on investment of 6%. Based on the forward sales compound annual growth rate, the basket carries a price-to-earnings-to-growth ratio of 4.6x—more than double the broader market average of 2.2x.