With the three major stock indexes trading at or near all-time highs, many investors are scratching their heads about where to look for new investment ideas at a time when interest rates have become so low again. Credit Suisse’s list of Top Investment Ideas from its Outperform ratings from this summer may have some calls for more speculative investors to consider. Of the 107 best ideas, 96 Outperform stocks classified as the firm’s top investment ideas.
After looking through the full best ideas list, we found eight stocks that had an upside threshold of roughly 50% or more to the Credit Suisse price target.
Before investors jump all in over massive upside, 24/7 Wall St. would remind them again that the three major U.S. equity indexes were all recently at or close to all-time highs. The views on some of these positions may change over the summer as another round of earnings is seen. Another consideration when looking at upside close to 50% and even higher is that traditional Dow Jones industrial and S&P 500 stocks currently have average total return upside call of roughly 8% to 10% at this stage in the 10-year old bull market. So the greater upside implies much more risk than with traditional large cap stocks.
Credit Suisse also noted to its clients that this list of research picks from the summer is not really supposed to represent a portfolio. It is just each of the analyst’s best ideas from their “Outperform” stocks with views in a six-month to 12-month horizon.
While we have shown the implied upside on each company here, we also have included trading data and the most recent consensus analyst price target from Refinitiv (Thomson Reuters) as a comparison.
Biomarin Pharmaceuticals Inc. (NASDAQ: BMRN) has a $133 price target at Credit Suisse, which implies 58% upside from the current $84 level. That is also $13 higher than the consensus target price of $120.29. Credit Suisse’s Martin Auster said:
Investor opinions are split following the recent valrox (hemophilia A gene therapy) Phase II 3-yea update and the interim Phase III results. While we agree there are some questions, we think investors are missing the bigger picture that the valrox 3-year durability was above investor expectations and valrox’s potential approval is incrementally de-risked. We expect potential accelerated filing in the next (approximately) 6 to 9 months setting up a 2020 approval, several years ahead of the nearest competitors.
CommScope Inc. (NASDAQ: COMM) has gone the wrong way since Credit Suisse first gave large upside targets here. In May, the firm took the target price down to $30 from $34, but that is still its top target. That said, shares currently trade near $16, which implies 85% upside. The consensus analyst target is closer to $26.
After adjusting for weakness from CommScope’s Arris acquisition, Credit Suisse’s Sami Badri and Michael Westendorf believe that a recovery in the second half of 2019 is a key focus point and that technology tailwinds remain in place for 2020. The team also sees margin downside as unlikely and that reducing post-merger leverage will help the company ahead.
Esperion Therapeutics Inc. (NASDAQ: ESPR) currently trades at about $46.75, and the Credit Suisse target price of $90 from Auster gives an implied upside of 92%. The consensus target price is about $89, and the market cap is $1.3 billion.
Credit Suisse believes the FDA’s decision to accept the bempedoic acid new drug application and to not hold an AdCom de-risks the regulatory cycle for the product. Management has continued to take steps to better capitalize the company to allow for the best possible drug launch.
Halliburton Co. (NYSE: HAL) is a leader in oil and gas services, and Credit Suisse’s Jacob Lundberg has a $33 price target. Credit Suisse’s reference price was $21.19, but Halliburton shares were last seen trading closer to $22.50. That still implies upside of close to 47%, before considering its 3% dividend yield.