Savvy investors that loaded up on the stay-at-home stocks made a fortune earlier this year, as some of the top stocks had parabolic upside moves despite not always having the fundamentals to back up those huge moves. With two COVID-19 vaccines that appear to have 95% efficacy seemingly ready to go, it may very well be time for a shift in momentum, and one top Wall Street strategist has a list of top companies that could be poised for a monster 2021.
Jefferies Small and Midcap strategist Steven DeSanctis likens the current situation to the end of the 1999 to 2000 tech bubble, when sales started to slow for high-multiple momentum stocks, and they were absolutely eviscerated while other areas of the market saw some growth. With the stay-at-home stocks having the potential to start slowing dramatically, other areas that lagged during 2020 could be ready to take off.
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The research report noted this about the current strategy:
We think strong merger and acquisition activity rolls into 2021, as companies are flush with cash, companies are being ignored and should go private, and scale matters. The trend in 2021’s earnings and sales versus 2019 keeps heading higher, valuations are still very cheap, housing is a gift that keeps giving and is better for small caps.
DeSanctis and his team screened the Jefferies Buy-rated names for those that are expected to see better sales growth in 2021 than 2020, have seen upward earnings and sales revisions and trade at below-market multiples. Many top companies made the list. These five offer investors some serious upside potential. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Deckers Outdoor
This clothing manufacturer makes some of the hottest-selling products and could be poised for a solid fall and winter selling season. Deckers Outdoor Corp. (NYSE: DECK) designs and markets footwear and accessories for men, women and children.
Deckers sells its products, including accessories such as handbags, headwear and outerwear, through domestic and international retailers, international distributors and directly to end-user consumers both domestically and internationally, through websites, and retail stores under the UGG (73% of revenue), HOKA (14%), Teva (6%), Sanuk (3%) and Koolaburra (3%) brands.
Jefferies noted earlier this year that while UGG is typically viewed as a fall/winter brand, the products’ strong sell-through during the pandemic helped further legitimize its standing as a year-round brand. In addition, HOKA remains on a path to be a $1 billion brand.
The Jefferies price target for the shares is $300, but the Wall Street consensus target is slightly higher at $304. Deckers Outdoor stock ended Friday at $247.21.
Freeport-McMoRan
This may be a compelling value at current trading levels, and it is one of the top picks at Jefferies in its sector. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and molybdenum producer, and the eighth largest gold producer. Its key operating and development assets are in Indonesia, North and South America, and Africa.
Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects and would clearly benefit from stronger demand and higher prices for industrial commodities.
Jefferies has a $23 price target, while the consensus price target is $20.75. Freeport-McMoRan stock closed at $21.25 a share on Friday.
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