These are Goldman Sachs’ favorite stocks with 50% or more upside
Stocks have been on a tear. The S & P 500 is soaring to record highs this year and the Dow Jones Industrial Average just had its best week of the year — and its eighth-straight winning session last Friday. Investors will look to the upcoming inflation prints for more clues as to when the U.S. Federal Reserve will cut rates. However, earnings so far have helped stocks stay resilient. As of Friday, 92% of S & P 500 companies have reported, with nearly 80% of firms beating Wall Street forecasts, according to FactSet data. “The combination of higher inflation and the potential for the Fed to take a more hawkish stance (not our base case) suggests that equity markets are in for some choppiness ahead — especially when compared to the strong gains stocks realized in 1Q24,” Goldman Sachs said in a May 1 note. Peter Oppenheimer, the investment bank’s chief global equity strategist, noted that while high equity valuations and the level of the U.S. 10-year Treasury leave markets “vulnerable” to more rises in yield, the dominance of large, profitable companies with strong balance sheets is a “positive buffer.” It “makes sense” to diversify equity exposures across select defensive, quality, growth names, he added. European stocks could also be attractive, with Goldman pointing out that the region’s stocks are expected to return around 1.5% of their market capitalization via share buybacks. Coupled with a roughly 3.5% dividend yield, that’s around a 5% total cash return to shareholders’ yield, according to the bank. ‘Conviction list’ stocks with big upside Investors still looking for quality names with more upside may want to consider names in Goldman’s conviction lists — directors’ cut. Those lists, which encompass stocks from the United States, Europe and Asia-Pacific, are the bank’s “curated and active” picks of between 15 and 30 top buy-rated stocks for each region. CNBC Pro scoured Goldman’s May conviction lists for stocks with further upside of 50% or more, based on the bank’s price targets. Quanterix : Goldman described the company as a pure-play neurology diagnostics company with “leading exposure” to the Alzheimer’s disease blood-based diagnostics opportunity. Goldman gave it a price target of $35, implying 107% upside. Neste : The bank said Neste is “extremely well positioned” to benefit from several regulatory tailwinds driving demand for biofuels, citing Europe’s Renewable Energy Directive targets for 2030. Goldman expects Neste to be the “global leader” in sustainable aviation fuel in the next two to three years. Given that leading market share, Goldman expects “healthy” margins in the segment till 2026. It added that the stock is at an “attractive” entry point now. Goldman gave it a price target of 37 euros ($40), implying 64% upside. Hybe : Goldman believes the South Korean entertainment company has a “significant” total addressable market expansion opportunity, as well as its larger scale. “We see robust earnings growth momentum up to 2025E at minimum, and with plenty of near-term catalysts ahead, we think the current positive sentiment will persist,” Goldman said. The bank gave the stock a price target of 380,000 Korean won ($277), or potential upside of 94%. — CNBC’s Michael Bloom contributed to this report.
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