Credit Suisse says buy these 13 'top of the crop' stocks that are set to demolish the market's low expectations of them

  • Credit Suisse says Wall Street has low expectations for some highly promising stocks.
  • These are “outperform”-rated stocks where its analysts are especially bullish relative to consensus.
  • The firm’s analysts say 12 of the stocks have upside of 10% or more in the next year.
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Markets are getting turned upside down by rising interest rates and plunging growth stocks, and moments like that can put a premium on experts’ very best ideas.

Credit Suisse’s Americas team just rolled out a string of those ideas, as well as stocks to avoid, by having their analysts identify their highest-conviction names in every major market sector. They then narrowed the search further by applying the firm’s HOLT framework to find top-rated stocks facing “the least demanding market expectations.”

Credit Suisse evaluated those market expectations by looking at the difference between the cash flow return on investment, or CFROI, the market currently expects and both the 12-month forecast for CFROI and the companies’ historic five-year CFROI.

The firm’s process also included comparing the analysts’ earnings forecasts and target price estimates to the analyst consensus, and measured a “level of consensus bullishness” based on buy, sell, and hold ratings.

They say these stocks have potential to beat the market because of that combination of strong prospects for the stocks and low expectations from Wall Street.

Of these 13 “outperform”-rated stocks, Credit Suisse’s price targets imply six should record gains of 20% or more in the next year, and 12 of the 13 have upside of at least 10%. All upside figures, ranked from the least to the most below, were calculated based on Thursday’s closing prices.

13. ChampionX

Ticker: CHX

Sector: Energy

Market cap: $4.4 billion

Thesis: “CHX is our preferred defensive SMID OFS name, given its production orientation, high-quality portfolio, and idiosyncratic cost-out and revenue growth opportunities.” — Jacob Lundberg

Target price: $22

Upside to target: 1.5%

Source: Credit Suisse

12. EOG Resources

Ticker: EOG

Sector: Energy

Market cap: $37.6 billion

Thesis: “EOG is our top pick amongst US E&Ps given its longstanding commitment to financial discipline and returns-focused approach … EOG also boasts below average financial leverage, a strong execution track record, and discount valuation versus peers.” — Bill Janela

Target price: $80

Upside to target: 12.0%

Source: Credit Suisse

11. Global Payments

Ticker: GPN

Sector: Information technology

Market cap: $59.6 billion

Thesis: “Our longer-term bullish stance remains rooted in the software-led approach, supplemented by consistent, strategic M&A. … we continue to expect GPN to return to M&A first amongst the three payments mega-mergers (i.e., lowest leverage and least complex deal), in addition to a best-in-class mgmt. team.” — Timothy Chiodo

Target price: $220

Upside to target: 13.1%

Source: Credit Suisse

10. Comcast

Ticker: CMCSA

Sector: Communication services

Market cap: $248.1 billion

Thesis: “Comcast has successfully differentiated its broadband Durable broadband EBITDA growth boosted by NBCU/Sky recovery offering from peers as social distancing has elevated broadband, driving stronger-for-longer broadband customer and cable EBITDA growth.” — Doug Mitchelson

Target price: $61

Upside to target: 13.1%

Source: Credit Suisse

9. Aptiv

Ticker: APTV

Sector: Consumer discretionary

Market cap: $41.6 billion

Thesis: “Exposure to the right products and trends provide APTV with one of the best outgrowth outlooks in the space. On top of this, APTV is one of the best positioned companies in our coverage in balancing our ‘Two Clocks’ industry framework – the ‘near’/cyclical + the ‘far’/secular.” — Dan Levy

Target price: $165

Upside to target: 15.2%

Source: Credit Suisse

 

8. Emerson Electric

Ticker: EMR

Sector: Industrials

Market cap: $52.3 billion

Thesis: “EMR sees a challenging growth environment and is pulling internal levers to drive margin expansion. … We also expect EMR to benefit from increased hybrid industry and software investments in the U.S. post COVID.” — John Walsh

Target price: $101

Upside to target: 16.1%

Source: Credit Suisse

7. Hershey

Ticker: HSY

Sector: Consumer staples

Market cap: $30.1 billion

Thesis: “Hershey is poised for an above-algorithm growth year (3%+) in 2021 because of sustainable market share gains in North America and a 2% tailwind from International markets which were compromised by government restrictions … In contrast to other food companies, it has consistently demonstrated pricing power to offset higher input costs.” — Robert Moskow

Target price: $175

Upside to target: 19.8%

Source: Credit Suisse

6. Apollo Global Management

Ticker: APO

Sector: Financials

Market cap: $20.2 billion

Thesis: “APO is our highest conviction long given its very attractive valuation (22x FRE with zero value for balance sheet and performance fees). Additionally, we think that the resolution of the Black-Epstein investigation will improve investor sentiment and help reaccelerate fundraising activity in 2022 which supports its next mega buyout raise (Fund X).” — Craig Siegenthaler

Target price: $60

Upside to target: 20.8%

Source: Credit Suisse

5. Advance Auto Parts

Ticker: AAP

Sector: Consumer discretionary

Market cap: $10.8 billion

Thesis: “We see an improving setup for the Aftermarket Auto Parts stocks. We believe that AAP offers the most upside and has the most favorable set up due to mix and company drivers.” — Seth Sigman

Target price: $202

Upside to target: 22.1%

Source: Credit Suisse

4. Crown Holdings

Ticker: CCK

Sector: Materials

Market cap: $13.3 billion

Thesis: “We believe Crown, the #2 market player within the global beverage can industry, has a strong case for valuation re-rating driven by robust growth in attractive US beverage can market, improving FCF generation, deleveraging balance sheet and upside optionality from ongoing strategic portfolio review.” — Curt Woodworth

Target price: $120

Upside to target: 24.8%

Source: Credit Suisse

3. Amazon

Ticker: AMZN

Sector: Consumer discretionary

Market cap: $1.56 trillion

Thesis: “E-commerce operators are broadly suggesting that newly onboarded and returning users are not only purchasing lower ASP items but also at a faster velocity. This suggests that willingness to order online is consequently becoming more every day versus every now and then.” — Stephen ju

Target price: $3,940

Upside to target: 33.3%

Source: Credit Suisse

2. IBM

Ticker: IBM

Sector: Information technology

Market cap: $107.4 billion

Thesis: “Against a tough macro that likely lingers in 1H21, we like management’s renewed focus on long-term growth (vs. near-term profit), aided by the planned spin-off of its Managed Infrastructure Services (MIS business), that we believe positions IBM to emerge stronger post-COVID as they aggressively pivot toward hybrid cloud.” — Matt Cabral

Target price: $160

Upside to target: 33.7%

Source: Credit Suisse

1. D.R. Horton

Ticker: DHI

Sector: Consumer discretionary

Market cap: $28.6 billion

Thesis: “D.R. Horton is a best in class operator with the highest D.R. Horton’s Buyer Segment Exposure exposure to entry level homebuyers, lowest debt leverage, and least on-balance sheet land risk.” — Adam Baumgarten 

Target price: $100

Upside to target: 35.9%

Source: Credit Suisse

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