Investors have been finding it harder to generate positive returns in 2018 than in 2017 and the few prior years. The bull market is effectively nine years old, and trade wars, rising interest rates and a slowdown in some of the expectations of global growth are some of the variables making it more difficult for investors to decide how to best position their investment portfolio.
Credit Suisse has refreshed its list of Top Picks. With this group of 91 stocks, the team of analysts uses a bottom-up approach for growth and value over the coming six-month to 12-month period. While this is specifically not meant to be a selection of new portfolio picks, and while some of these top picks have had Outperform ratings from the firm for quite some time, it turns out that after screening the group that eight of the 91 picks had implied upside of 50% or more.
Investors need to understand that traditional new Buy and Outperform ratings generally come with implied upside of 8% to 10% at this stage of the bull market. So if upside of 50% is projected, it either means that there is more risk or it may be a situation in which the stock price has pulled back substantially from its highs.
24/7 Wall St. screened the list of 50% upside picks from Credit Suisse’s top picks and we included other metrics. We included a trading range in the past year and the Thomson Reuters consensus analyst price target. We also included the performance so far in 2018 to show if this pick from the firm has been a dud in 2018 or the firm just sees a lot more growth ahead. Additional color has been added on some of the Credit Suisse top picks as well.
BlackRock Inc. (NYSE: BLK) has a $743 price target at Credit Suisse, implying upside of 49% from the current $499.50 share price, but the 2.3% dividend yield gets this one up to the 50% threshold for total return investors. BlackRock has a consensus price target of $608.58 and a 52-week range of $408.62 to $594.52. Year to date, the stock is down 2%.
BlackRock owns the largest exchange traded fund (ETF) manager in the world via its iShares unit. The firm views ETF and passive investing segments as high growth, and it believes that the company will capitalize on the secular trends.
Caterpillar Inc. (NYSE: CAT) was last seen at $141.25 on the Credit Suisse view, and the firm’s $210 price target implies upside of almost 49%. The consensus price target is $175.03, and the 52-week range is $105.11 to $173.24. Year to date, the stock is down 13%.
While Caterpillar has major trade war risks, Credit Suisse believes that many of the concerns around its end markets peaking are simply overdone. Mining, Latin American construction, drilling, oil production, power generation, locomotive and marine are all pointed out as remaining well below historical levels. The firm also thinks that the market forgets how deep the recent industrial recession was and that this is currently only in the second year of a recovery, while historically cycles last five to six years.
Deere & Co. (NYSE: DE) was last seen at $144.55, and the Credit Suisse target price of $231 implies upside of almost 60%. The consensus analyst target is $186.18, and a 52-week range is $112.87 to $175.26. Year to date, the stock is down nearly 10%. The top picks summary on Deere noted this:
We still believe that Deere will be the breakout stock for the Machinery group with markets that have only modestly started to recover off a bottom and with plenty of room for upside which brushes off any skepticism on peak demand that other names are facing. At the same time Deere’s story into 2019 looks even more encouraging regardless of end market demand.