With earnings for the first quarter all but over, Wall Street analysts are turning their attention to the second and third quarters of 2020. Most agree the overall economy will have a horrible second quarter as unemployment peaks and economic metrics come in at some of the worst levels ever. The good news for investors is the gradual reopening of the country from the COVID-19 pandemic restrictions should at least restart the engines of growth.
In a new research report, Goldman Sachs derivative analysts focus on 12 top tactical trades in which they feel companies will exceed the current earnings estimates. Note that the report is designed for investors using call options for leverage and to take a position. Not all investors are well versed in call option trading, so we focused on the actual stocks themselves.
The Goldman Sachs team noted this in the report:
The complexity of the current economic environment makes it unusually important to focus on company level forecasts, in our view. Collaborating with analysts across our Americas Coverage, we highlight 12 stocks where our analysts have an out-of-consensus view that estimates are likely to be revised upward over the coming months.
We screened the list of the top stocks to buy in the tactical trade group and found five that look like outstanding ideas for the next six months. We skewed to the more conservative picks, as the market is expensive and has had a big “melt-up” rally off the March lows, which may be on the verge of rolling over. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Insurance companies tend to do well regardless of the economy, and this industry giant may be an outstanding pick-up for investors. Allstate Corp. (NYSE: ALL) is the largest publicly traded personal lines insurance company, with about 12% of the personal lines market (one in eight households).
Allstate is primarily a direct writer. Besides a full array of personal lines P/C products (preferred, standard and nonstandard auto insurance, and homeowners’ insurance), the company also offers life insurance and annuity products.
Shareholders receive a 2.35% dividend. The Goldman Sachs price objective for the shares is a whopping $124. The Wall Street consensus target price is $116.27. Allstate stock closed Wednesday down almost 6% to $92.08 a share.
This top health care play is a very solid stock to own, with hospitals and doctors ready to focus on existing condition patients. Baxter International Inc. (NYSE: BAX) provides a portfolio of renal and hospital products.
Its Renal segment provides products and services to treat end-stage renal disease, irreversible kidney failure and acute kidney therapies. This segment offers a comprehensive portfolio to meet the needs of patients across the treatment continuum, including technologies and therapies for peritoneal dialysis, in-center hemodialysis (HD), home HD, continuous renal replacement therapy and additional dialysis services.
The Hospital Products segment manufactures intravenous (IV) solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps, inhalation anesthetics and biosurgery products. This segment also provides products and services related to pharmacy compounding, drug formulation and packaging technologies.
Shareholders receive a 1.15% dividend. Goldman Sachs has a $93 price target, while the consensus price objective is $97. Baxter stock closed Wednesday at $85.55.