10 Credit Suisse Top European Stock Picks for US Investors

On Shire, the top picks report said:

Shire trades on a discount to European major pharma peers on PharmaValues EV/NPV. Shire effectively doubled in size with the acquisition of Baxalta adding an easily integratable rare disease business and blood fractionation business where synergies will be more difficult to achieve. We expect continued growth from key product Vyvanse from the adoption of binge eating disorder and the strong launch of Xiidra (lifitegrast) in dry eye.

Ryanair Holdings PLC (NASDAQ: RYAAY) was one of the three top picks in transports and logistics at Credit Suisse. The firm sees 23% upside to its target. Some of the logic behind the Ryanair pick was as follows:

  • Ryanair’s market power.
  • The Credit Suisse model shows that about 40% of competitor seats cost three times Ryanair’s expected 2018 fares.
  • It can grow through taking market share from weaker competitors.
  • Price convergence in Europe is growing.
  • The price premium achieved by EasyJet over Ryanair has been low.
  • While pricing is likely to remain under pressure in the near term, periods of extreme uncertainty have historically provided big opportunities for Ryanair.

ArcelorMittal S.A. (NYSE: MT) and Rio Tinto PLC (NYSE: RIO) were two of the five top picks among European metals and mining. ArcelorMittal’s projected upside is roughly 15%, and Rio Tinto was shown to have upside of 14% at the base cases, not including dividends.

On Arcelor Mittal, the report said:

Drivers include positive macro signs for the stock and uplift in steel and iron ore prices. Also, the company’s action plan of targeted cost savings of $3 billion by 2020. Lower Chinese exports: Stronger domestic demand in China and hence lower exports will help domestic steel players. Furthermore, protectionist measures in the US and EU will curb imports.

On Rio Tinto the firm said:

We see equity and macro conditions aligning for Rio as Chinese credit conditions are now more accommodative and we expect a supportive economy ahead of the leadership transition through 2017…. The key drivers of Rio Tinto’s earnings are iron ore prices and Chinese and global steel market production.

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