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10 Stocks That Can Outperform in 2018: Goldman
10 Stocks That Can Outperform in 2018: Goldman
By Mark Kolakowski
| Updated January 17, 2018 — 6:00 AM EST SHARE
ADD TO WATCHLISTDE
Deere & Co
167.43
-0.07%
CAT
Caterpillar Inc
168.50
-0.48%
NOC
Northrop Grumman Corp
317.51
+1.59%
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Investors should reduce tech stocks to an equal weight allocation in their portfolios,
while going overweight in financials and industrials, Goldman Sachs Group Inc.
(GS Goldman Sachs Group Inc 253.65-1.86%) advises.
This important pivoting of investment strategy was presented in their U.S. Weekly Kickstart
report dated January 12. What Goldman calls its "Conviction List" contains 15 buy-rated stocks,
including these 10, with their expected gains implied by the differences between their January 11
closes and Goldman's 2018 target prices:
- Bank of America Corp. (BACBAC
Bank of America Corp
31.18
-0.19%
), +8% to target price - Wells Fargo & Co. (WFCWFC
Wells Fargo & Co
63.88
+2.21%
), +10% to target price - MetLife Inc. (METMET
Metlife Inc
52.55
+1.35%
), +14% to target price - Intercontinental Exchange Inc. (ICEICE
Intercontinental Exchange Inc
74.80
+0.29%
), +12% to target price - BlackRock Inc. (BLKBLK
BlackRock Inc
576.51
+2.40%
), +13% to target price - Deere & Co. (DEDE
Deere & Co
167.43
-0.07%
), +27% to target price - Caterpillar Inc. (CATCAT
Caterpillar Inc
168.50
-0.48%
), +21% to target - Northrop Grumman Corp. (NOCNOC
Northrop Grumman Corp
317.51
+1.59%
), +16% to target - L3 Technologies Inc. (LLLLLL
L3 Technologies Inc
212.61
+2.52%
), +9% to target - United Parcel Service Inc. (UPSUPS
United Parcel Service Inc
134.01
+0.85%
), +9% to target
To put these recommendations in perspective, Goldman is projecting a year-end value of 2,850
for the S&P 500 Index (SPX), just 2.7% above its January 16 close.
(For more, see also: 5 Top Value Stocks for 2018.)
Financial StocksGoldman highlighted 10 financial stocks, of which five are included above. Tax reform, deregulation,
and rising interest rates should be the major drivers of outperformance among large-cap banks
such as Wells Fargo and Bank of America, in Goldman's view. With excess capital of 8% and
9%, respectively, per the latest CCAR bank stress tests performed by the Federal Reserve,
Goldman's analysts expect these two banks to increase share repurchases by about 34% and
dividends by about 19% through the 2019 CCAR year.
Bank of America should be an especially big beneficiary of rising interest rates, per Goldman,
given its large book of floating rate loans and strong deposit franchise.
Wells Fargo, meanwhile, should be putting regulatory issues behind it, in Goldman's opinion.
MetLife is on track to add between 100 and 150 basis points to its ROE by 2020,
Goldman projects. Investments in cost saving technology and a less volatile business mix
should drive the profitability improvement. Additionally, life insurance companies are among
the biggest winners when the yield on the 10-Year U.S. Treasury Note rises,
Goldman adds.
Industrial Stocks"Machinery stocks present a particularly compelling opportunity in 2018 as the industry
continues to emerge from a cycle trough," Goldman writes.
Per their analysis, Deere and Caterpillar have strong operating leverage,
while Deere has expanded its profit margins. Both also have "attractive normalized valuations"
in Goldman's opinion.
Additionally, Caterpillar is starting to realize benefits from productivity-enhancing and
cost-cutting investments, per Goldman. In that vein, Goldman also placed Deere in a basket
of stocks that are expected to outperform as the result of high R&D investment and capital spending.
(For more, see also: 9 Stocks That Can Outperform As Bull Market Ages: Goldman.)
"Defense stocks should outperform again in 2018 as growth continues to exceed expectations,
" Goldman says. In particular, they project higher 2018 revenue growth than consensus for
Northrop Grumman (+7% vs. +6%) and L3 (+6% vs. -3%). Over the next decade,
Goldman forecasts 10% average annual revenue growth for Northrop Grumman.
Regarding L3, they find it valued less than its peers on the basis of P/E, EV/EBITDA, and
FCF yield, discounts that they expect to shrink in 2018, propelling the stock higher.
Read more: 10 Stocks That Can Outperform in 2018: Goldman | Investopedia
https://www.investopedia.com/news/10-stocks-can-outperfom-2018-goldman/#ixzz54X0tWUKS
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凡事唯有投入，結果才能深入; 凡事唯有付出，結果才能傑出;
凡事唯有磨鍊，結果才能熟練; 凡事唯有不煩，結果才能不凡。
能與智者同行，你會不同凡響; 能與高人為伍，你能登上巔峰。
你雖不能改變環境,但卻可以轉換心境;你雖不能樣樣勝利,但卻可以事事盡力。
Dr. Chao Yuang Shiang (PH.D in management), Assistant professor,Dep.of Finance,Nanhua University,Taiwan.
website:amazon.com/author/drchao |
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