3 Stocks Poised to be 2025 Winners, According to UBS

UBS recently revealed some of its top retail stock picks that could outperform the S&P 500 for 2025. And while the following retail high-flyers have already enjoyed decent first-half gains on the year, I’m inclined to stick with UBS in believing that the following retail gainers have legs to run even higher. While their valuations are, by no means, depressed, their strong fundamentals and economically resilient growth profiles make a premium price tag well worth paying.

Without further ado, let’s check out the so-called “COW” stocks, a clever acronym coined by UBS to describe its top three retail plays, and I’ll chime in and give my personal favorite of the trio.

Costco

First up, we have Costco (NASDAQ:COST), a profoundly well-run retailer that I’ve praised in numerous prior pieces. The stock has delivered a bit more than a market return so far this year, up 8.4% year to date. That’s decent, but a bit sluggish compared to what long-term Costco shareholders are used to. Undoubtedly, shares have really tapered off this year after melting up in the past two years. And though there’s no telling how long the bulky firm behind Kirkland Signature will consolidate, history seems to suggest that buying the stagnation is often a wise move.

UBS analyst Michael Lasser is a fan of the stock for its resilient growth potential. He also thinks the firm has “ample tricks up its sleeve” to keep members happy. He’s right. I think the stock is likely to head back to the four figures in the second half as Costco’s exceptional managers continue to make the optimal move every step of the way.

If the economy booms again, look for Costco members to ramp up spending on discretionary goods (maybe that gigantic bear?). But if the economy heads south, look for Costco to win new business from rival retailers that can’t stack up to the value proposition that Costco offers (low-cost bulk buys, access to the cheap and delicious food court, and other newly added perks). At 49.0 times forward price-to-earnings (P/E), though, Costco stock doesn’t seem like the best name in “COW,” at least in my opinion.

O’Reilly Automotive

O’Reilly Automotive (NASDAQ:ORLY) is a recent stock-split stock that, like Costco, is a master of its corner of retail. The auto-parts retailer seems to be doing everything right. And with a few strong quarters in the books, the stock is skewing on the expensive side. At 31.6 times forward P/E, ORLY shares are quite a bit cheaper than COST. But if you’re a value seeker, ORLY stands out as a pricey name in retail and one that could be a tad overheated and overdue for a pullback.

Still, O’Reilly is firing on all cylinders and, with that, you should expect to pay up. As UBS pointed out, O’Reilly is continuing to take share in the often overlooked auto parts market.

They’re also a potential beneficiary of tariffs, especially if O’Reilly commits to offering their customers the best possible deals by choosing not to pass on the tariffs to consumers. Indeed, the O’Reilly story seems to rhyme with that of Costco’s. You’ve got a share taker that’s resilient in the face of tariffs and a potential economic slowdown. With most analysts sharing UBS’s sense of bullishness, I’d be inclined to give the name a close look for the second half.

Walmart

Walmart (NYSE:WMT) is hoping to give Amazon (NASDAQ:AMZN) Prime Day a good run for its money as it pulls the curtain on its own slate of impressive deals. Indeed, Walmart has done a great job of firing back at the retail colossus, and as it continues investing in its digital and AI capabilities, Walmart seems to have the know-how to keep up in the fiercely competitive world of retail. Personally, I think Walmart could be well on its way to a $1 trillion market cap by year’s end, as the firm equips distribution centers with the latest and greatest tech.

With a 37.8 times forward P/E multiple and no shortage of drivers to propel a breakout to the triple-digits, I’d not stand in the way of a firm that I think is becoming more like a tech company by the day. Like Costco and O’Reilly, Walmart should do fine, even if a U.S. recession were to happen at some point in the next 18 months. And while I don’t view Walmart as cheap at just shy of $100 per share, I do think it’s the retailer with the most to gain if it continues playing its cards right.

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