Have a 'COW' — UBS analyst recommends 3 retail stocks to beat the market

UBS is recommending "COW" stocks—Costco, O'Reilly Automotive, and Walmart—as defensive plays amid macroeconomic uncertainty, citing their strong year-to-date performance and potential to outperform regardless of the economic climate. Analyst Michael Lasser notes these retailers are well-positioned for upward earnings revisions, benefiting from unique drivers that support sales growth and market share gains, with potential for accelerated upswing if the macro picture improves. Year to date, O’Reilly is up 14%, Costco 9%, and Walmart 4%, compared to the S&P 500's less than 3% gain.

Analysis

UBS Group AG has identified Costco Wholesale (COST), O'Reilly Automotive (ORLY), and Walmart (WMT) – collectively termed "COW" stocks – as compelling investments capable of outperforming in diverse economic climates, particularly amidst current macroeconomic uncertainty. This view is supported by their strong year-to-date 2025 performance, with ORLY shares gaining 14%, COST 9%, and WMT 4%, significantly outpacing the S&P 500's sub-3% rise. UBS analyst Michael Lasser highlights these retailers' positioning for upward earnings estimate revisions, underpinned by unique, hard-to-replicate competitive advantages: Costco's loyal membership base, O'Reilly's strategic store footprint aiding efficient delivery, and Walmart's extensive scale and e-commerce growth. The investment bank suggests these companies not only offer a "measure of safety" during volatile periods, driven by factors like trade policy concerns which have somewhat eased since April due to delayed tariff implementations until early July, but also possess ample upside should the macroeconomic picture improve, as they tend to benefit from disruption and emerge stronger.

Key Decisions for Investors

• Investors should consider the "COW" stocks (Costco, O'Reilly Automotive, Walmart) for their potential to offer defensive attributes during macroeconomic uncertainty while retaining upside if conditions improve, as highlighted by UBS.
• Closely monitor upcoming earnings revisions for these retailers and developments in U.S. trade policy, as these are significant factors expected to influence their performance.
• Given their strong year-to-date outperformance and unique company-specific drivers, these equities may warrant consideration for portfolios seeking resilience combined with growth potential.