Many Key Changes to Goldman Sachs Conviction Buy List for 2014

2014 is upon us, and that means that investors have started positioning their portfolios for the year ahead. 24/7 Wall St. reviews many analyst calls each day in order to find the hidden gems of stocks to buy and stocks to sell. If one firm can create interest around a stock, it is Goldman Sachs. Investors have followed its Conviction Buy List for years, but 24/7 Wall St. has tracked many major changes to this prized list in the final weeks of 2013.

Investors need to be aware that many “Conviction Buy” upgrades are simply raised from an official Buy rating at the time. Some stocks are actually raised from Neutral to the Conviction Buy List, and this is when investors usually pay close attention.

One other issue to consider is that Goldman Sachs only targets institutional investors and very high net worth individuals. In short, this is what the wealthy and well-to-do are being told to do with their money.

When investors see Goldman Sachs remove a stock from the Conviction Buy list, they often lighten up on the stock, even if the firm still maintains an official Buy rating.

Investors seem to be universally positive for stocks for 2014. It has already been decided that the QE tapering would begin in January, we are getting a new Fed chairman and GDP estimates are ticking higher. It now even seems likely that Europe will recover along with the rest of the world in 2014.

Goldman Sachs issued an upside call to 1,900 for the S&P 500 in 2014, but they also believe a 10% correction is likely to occur before that comes about. The numerous changes to the Conviction Buy List seem to support this outlook, but we would caution that many investors are hoping for lower prices to get into long-term stocks again.

Some of the top stocks on the Conviction Buy List have been removed and other new names of highly visible companies have been added. We have not shown the companies deleted from the Conviction Buy list in most cases, and most international stocks not listed in the United States were generally left off as well.

AbbVie Inc. (NYSE: ABBV) was already at Buy but was raised to the Conviction Buy List at Goldman Sachs on December 5. The firm’s price target for this pharma stock is $60, versus about $53 at year-end. The highest price target now is up at $67, but we would point out that Morgan Stanley recently downgraded it to Equal Weight from Overweight. Pfizer Inc. (NYSE: PFE) was removed from the list to make room, but Goldman Sachs kept its Buy rating and $35 price target on Pfizer.

Atwood Oceanics Inc. (NYSE: ATW) was added to the Conviction Buy list on December 16, after having been raised from Neutral to Buy back in May. Shares were at $51.11 before the call, rose to $52.11 on the day of the call and have trended up to almost $53 since. Atwood’s consensus price target now is almost $65.

Dollar General Corp. (NYSE: DG) remains a store that most Goldman Sachs clients would never visit, but the secular growth story remains for investors. Goldman Sachs raised the king of dollar stores to the Conviction Buy List on December 6. Unlike many other stocks where there was already a Buy rating, this upgrade was raised from a Neutral rating. The firm also raised its price target to $71 from $64, and the consensus price target is closer to $66 now. The highest analyst price target is up at $73.

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