Investing

10 Top 2016 Stock Picks From Goldman Sachs, Merrill Lynch and Other Key Analysts

Enterprise Products Partners
> Year-end price:
$25.58

Enterprise Products Partners L.P. (NYSE: EPD) is still considered one of the best-run master limited partnerships (MLPs) by the investing community. That being said, sector pressure from the energy woes has taken a toll. Enterprise’s units are down almost one-third from the 2015 peak, and Merrill Lynch has had it rated as Buy. It would seem that the price target of $35.00 from Merrill Lynch in 2015 might have some room to come lower, but the reality is that Enterprise still has a $34.00 consensus price target. Its yield-equivalent from its distribution is now over 6% as well.

If Merrill Lynch is right, there is an equivalent total return opportunity here of over 40%. We are talking about the energy patch here, even if it is in infrastructure and the toll road model.

3M
> Year-end price:
$150.64

3M Co. (NYSE: MMM) was a top Merrill Lynch pick screened from late in December from the Merrill Lynch US 1 list — and it was also one of the top 10 picks for 2016. 3M’s stock was burned toward the end of 2015 when the company disappointed on guidance. Still, Merrill Lynch thought the firm was conservative and it sees a better earnings picture than other analysts, and that 3M’s stock drop brought an outstanding entry point for new capital and accounts that are adding to positions. 3M investors receive a 2.75% dividend.

The Merrill Lynch price target of $178.00 would imply more than 20% upside for 2016 if you include the dividend. Still, the much more conservative consensus price target of $159.36 implies about 8.5% upside for 2016. Does it matter if 3M’s 52-week high is $170.50?


PayPal
> Year-end price:

$36.20

PayPal Holdings Inc. (NASDAQ: PYPL) is now free from the firm grasp of eBay, and Goldman Sachs loves the value and growth here for far longer than just 2016. Goldman Sachs has a price target of $45.00 that is over $3.50 higher than the consensus price target. The firm even initially put PayPal on the Conviction Buy list in October, right before PayPal’s strong earnings report. Quite simply, Goldman Sachs sees PayPal not bending to waves of new competition in the online payments space due to its base of millions upon millions of customers already embedded here and scared to try out new payment platforms.

If Goldman Sachs is right, then there is 24% upside from the year-end price. If the consensus analyst target of $41.41 from year’s end proves right, then there is a more conservative 14% implied upside. PayPal’s post-split high is $42.55.

Starbucks
> Year-end price:
$60.03

Starbucks Corp. (NASDAQ: SBUX) has taken over the civilized world’s coffee market and wants to do the same with tea (and maybe even in wine). Goldman Sachs likes the wide moat that Starbucks has built up. It sees huge overseas expansion possibilities still awaiting in key growth markets.

Goldman Sachs most recently had a $69.00 price target, which would imply close to 15% upside for 2016 if you add in the dividend. The consensus price target is closer to $68.00, and investors should consider that Starbucks has a split-adjusted all-time high of $64.00.

Teva Pharmaceutical
> Year-end price:
$65.64

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) is one of the top picks for 2016 from RBC Capital Markets in health care stocks. The firm loves the generic drug gian,t and it could potentially be giving investors the best entry point in years. One of the drivers here is the huge acquisition of Allergan’s generic-drug business for $40.5 billion in cash and stock, after failing to get Mylan to the wedding altar. RBC sees an improving product mix combined with accelerating growth from Teva having the largest generic pipeline in the United States. Does it help if Goldman Sachs was positive in November or that Teva is one of the 24/7 Wall St. top 10 stocks to own for a decade?

RBC has an $85.00 price target for Teva, much higher than the consensus target of $77.59. The RBC target implies a total return upside of more than 30%, with the 2% dividend yield included. Teva’s consensus target signals upside of 20%, if you include the dividend in the total return. The 52-week high is $72.31.

Visa
> Year-end price:
$77.55

Visa Inc. (NYSE: V) was just added to the prized Conviction Buy List by Goldman Sacks in mid-December. This may be one of the newer Dow Jones Industrial Average components, but the firm sees potentially larger upside even after a 19% gain in 2015. Visa is considered a winner in the electronic payment and IT services space, and Goldman Sachs sees Visa holding its share and winning in payment processing despite continued sector pressure from cloud cannibalization.

Goldman Sachs’ $86.00 price target for Visa comes with potentially more than 10% upside, with its low dividend included. What stands out here is that the consensus analyst price target was almost $86.50 at the end of 2015. Now this call might not seem aggressive at all. Elsewhere, RBC calls Visa as a top tech pick despite its financial processing activities.