Almost every December it seems that investors stop thinking about the prior 11 months and turn their attention to how they want to position their investments for the new year. With the Dow Jones industrials and the S&P 500 close to flat for 2018 so far, albeit with lots of volatility, many firms are issuing their top picks and listing their favorite sectors and trends to consider for the year ahead.
Credit Suisse is one of those firms. The large investment bank added 11 companies to its Top Picks list and deleted 10 names. These are all covered with Outperform ratings, and investors need to consider that Credit Suisse’s version of Outperform is often against a company’s peers rather than an absolute outperforming of the market.
Investors also should consider that Credit Suisse on last look had issued the most bullish S&P 500 outlook for 2019 among its major peers. That would imply that some of the gains of these top picks might even be more than other firms are expecting. We have included trading history and the consensus analyst target prices for a reference.
Credit Suisse makes changes from time to time on this Top Picks list, but the firm warns investors not to treat this as a portfolio or basket. These are merely a snapshot of each sector research team’s best ideas, with generally a six-month to 12-month time horizon. It is also possible that forthcoming developments and market conditions might cause the ranking of each sector’s top picks to change. Credit Suisse does not demand that these top picks pay dividends, and there are three airline picks here as they recently were added into the Top Picks coverage.
Alaska Air Group Inc. (NYSE: ALK) is the top airline pick at Credit Suisse, which has an $83 target price on the shares. The firm sees merger synergies and other strategic revenue initiatives ramping into 2019 at the same time that there are underappreciated cost tailwinds driving margin expansion and earnings growth ahead. Declining capital spending also is driving strong free cash flows here in a way to help boost shareholder returns.
Alaska Air shares were last seen trading at $64.94 on Friday, and they have a 52-week trading range of $57.53 to $76.06 and a consensus target price of $80.73. The stock has a dividend yield of 1.8%.
Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) has a $156 target price at Credit Suisse. The firm sees the oral proceedings for the new Soliris composition of matter patent in the European Union this next February as a key catalyst as it could extend protection out to 2027. A similar strategy was employed successfully in the United States and Japan, and this would further alleviate investor concerns around potential biosimilar competition and also allow ample time for patient conversion from Soliris to ALXN1210.
Alexion shares most recently traded at $115.60. The stock has a 52-week range of $102.10 to $140.77 and a consensus target price of $164.35.
Burlington Stores Inc. (NYSE: BURL) is seen strong for relative same-store sales and earnings per share acceleration into 2019. The firm has a $190 price target and thinks that Burlington’s levers to drive upside are more visible: easier sales comparisons, accelerating new store contribution and better cost controls to fight price pressure.
Burlington shares were last seen at $157.79. The consensus target price is $161.25, and the 52-week trading range is $108.34 to $180.27.
Cactus Inc. (NYSE: WHD) is a precision manufacturing company that designs, manufactures and sells wellhead assemblies that are used on every oil and gas well drilled to provide a platform off of which all work in the well is performed. It has a 27.4% market share now, up from about 9% just four years ago, and Credit Suisse has a $40 target price. It sees its market share continuing to climb into the mid-30% range longer term as the company’s customer base expands.
Cactus shares ended the week at $29.37, in a 52-week range of $19.18 to $40.97. The consensus target price is $41.50.