Most major brokerage firms and their research departments have a list of their favorite Buy-rated and Outperform-rated stocks. At Credit Suisse, this is their prized U.S. Focus List, which was given a refresh for the start of June.
Credit Suisse’s Focus List includes stocks in which the firm’s analysts have high conviction for an expected total return of more than 15%, when you include the expected price gain and dividend payments. They are also said to be backed by differentiated analysis or a nonconsensus call, and they are also expected to have an upcoming catalyst over a three-month to six-month period. The Focus List picks all have Outperform ratings as well.
24/7 Wall St. screened the Focus List to look for the companies for which Credit Suisse sees the most in implied total returns. Four large-cap picks on the list have an expected total return projected to bring 30% to 60% returns to investors.
What investors need to keep in mind is that most traditional Buy and Outperform ratings come with upside projections of 8% to 15% at this stage in the bull market. These picks from Credit Suisse are generally much higher than the consensus analyst price targets. Investors should also use these upside targets as only one source of information because they are generally much more optimistic than other analysts covering each stock.
The upside targets were based on prices from June 1, but more recent pricing data has since been included, along with historical trading data and the consensus analyst target price from Thomson Reuters. We have also included some of the more optimistic “Blue Sky” target price data, if available, from the most recent Credit Suisse analyst reports issued ahead of the Focus List updates.
21st Century Fox Inc. (NASDAQ: FOXA) has a $37 target price, with an estimated 37% upside on the Outperform rating, along with a 1.3% yield. Its shares were last seen trading at $27.59, with a 52-week range of $23.33 to $32.60 and a consensus analyst price target of $33.75. The company has a total market cap of $51.0 billion.
Credit Suisse’s most recent call was on May 11, after the company’s earnings report. The firm raised earnings estimates after citing a positive message on subscribers and advertising, with domestic affiliate revenue accelerating, and offering value. The firm’s Blue Sky valuation of $47 for 21st Century Fox was based on 11.8 times its enterprise value to EBITDA in a sum of the parts valuation and based on its long-term advertising analysis.
Pioneer Natural Resources Co. (NYSE: PXD) has an Outperform rating, and its upside was almost 32% to the $220 price target, though it doesn’t even currently pay much of a dividend worth noting. Shares of Pioneer were recently trading at $164.80. The consensus price target is $229.38, and the 52-week range is $146.08 to $199.83. Pioneer has a total market cap of $28.1 billion.
Pioneer Natural Resources was assumed in coverage back in early May and no changes were made at that time. That being said, it was given a Blue Sky scenario for a $292 stock price, if the assumptions shifted higher for oil to a flat $70 West Texas Intermediate crude price and a $3.50 gas price deck.
Blackstone Group L.P. (NYSE: BX) is rated as Outperform and its $45 price target represented implied upside of 44%, if you include close to a 6% yield. Shares of Blackstone were trading at $33.62, with a consensus price target of $36.46 and a 52-week range of $22.45 to $33.93. Its total addressable market cap is $41.0 billion.
Blackstone recently won from a huge private equity fund targeting infrastructure, and Credit Suisse sees this infrastructure move as a fifth silo to bolster the returns on its four main areas of focus (real estate, credit, private equity, hedge funds).
Voya Financial, Inc. (NYSE: VOYA) is also rated as Outperform at Credit Suisse and its target price of $56 give it an implied upside projection of almost 64%. The shares were last seen trading hands at $35.44. The 52-week range is $22.75 to $42.96, and the consensus price target is $46.08. Voya has a market cap of $6.6 billion.
Voya was reiterated as a top pick at the firm in May after the analyst met with management. The firm even has a $65 Blue Sky valuation that would imply far more upside if things go better than expected. That even higher upside was based on 11 times the best case 2018 pro forma earnings, plus $5 from other issues.
There were also two runner-ups on the Focus List with the implied total return of 30% upside if their share prices see any selling pressure.
Celgene Corp. (NASDAQ: CELG) was shown to have 29% upside at the time to the $148 target price. Its shares were recently trading at $119.00, with a 52-week range of $94.42 to $127.64 and a consensus price target of $141.88. The company has a market cap of $93.0 billion.
Johnson Controls Inc. (NYSE: JCI) was projected to have 25% upside to its $51 Credit Suisse target. Its shares were trading at $42.10. The consensus price target is $48.78m and a 52-week range is $39.16 to $48.97. Johnson Controls has a market cap of $39.5 billion.