While 24/7 Wall St. covers many top analyst upgrades, downgrades and initiations each day of the week, there is a separate class of these upgrades that always garners more widespread attention than routine upgrades or reiterations of Buy and Outperform ratings. These are the conviction calls and the changes top firms make to top picks lists of stocks for upside.
For a firm to list a stock as a top pick, it implies stronger conviction for that upside. Credit Suisse has made seven additions to its list of 55 top picks. These all come with Outperform ratings, and generally the implied upside to the analyst price target ranges from 15% to over 50%.
Credit Suisse’s seven additions are listed as having the “highest conviction combined with the least demanding market expectations.” In short, they feel like these picks have very little in the way and that the companies can more easily get to their targets without a massive stock market rally.
At this stage in the recovery, and now that stock prices have recovered all or most of their panic selling losses from March, most implied upside on Buy and Outperform ratings is generally considered to be in the 8% to 10% range. For top picks and conviction picks that tends to be higher, hence the 15% to 50% range mentioned.
Remember that no analyst call, no matter how strong the conviction happens to be, should ever be used as the sole basis to buy or sell a stock. We have included consensus price targets from Refinitiv as a reference to show if Credit Suisse is more or less aggressive than other firms.
These are the seven new top picks from Credit Suisse for September of 2020.
Ares Management Corp. (NYSE: ARES) is a new top pick with an Outperform rating, and the Credit Suisse target price of $49 implies more than 24% upside, before adding in its 4% dividend yield for a total return. The firm’s six-month outlook is based on high visibility and it being positioned to thrive in a distressed cycle.
Credit Suisse sees the next two to three years with Ares earning an additional $350 million in incremental management fees without raising any additional capital. One aspect is $23 billion of shadow assets under management not yet turned on and new leverage rules under the business development company rules.
Ares Management stock has a 52-week trading range of $20.20 to $42.40, a consensus target price of $45.25 and a $5.7 billion market cap.
Ashland Global Holdings Inc. (NYSE: ASH) has a $91 target price, up 24% from the last $73.50 share price seen, and it also comes with a 1.5% dividend yield. Credit Suisse’s bullish thesis is based on higher earnings before interest, taxes, depreciation and amortization improvement, market share gains ahead, cost-cutting opportunities, stronger free cash flow and a strong capital allocation focus that will be around buybacks in the near-term and mergers and acquisitions down the road.
Ashland Global stock has a 52-week trading range of $38.88 to $81.82, a consensus target price of $88.90 and a $4.4 billion market cap.
Carlisle Companies Inc. (NYSE: CSL) is a top roofing player. Credit Suisse’s $150 target price and Outperform rating imply an upside call of just over 23% to the $121.50 current share price. Its dividend yield is 1.7%. The firm believes that the investing community remains skeptical about the outlook of the commercial end-market, but Carlisle sells a non-discretionary essential product in its eyes.
Another boost here is that Credit Suisse points out that it is exposed to geographies, verticals and building types that are less affected than the commercial market overall. In the end, it sees Carlisle’s products set to outperform the market.
Carlisle Companies stock has a 52-week trading range of $97.55 to $169.86. Its consensus target price is $147.75, and it has a $6.9 billion market cap.