Goldman Sachs says buy these 15 overlooked stocks that its analysts are confident will each jump at least 10% by the end of the year

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A man sits on the Wall street bull near the New York Stock Exchange (NYSE) on November 24, 2020 in New York City.

  • Goldman Sachs says relative valuations are now in line with historic norms.
  • The firm is looking for quality companies that trade at attractive multiples.
  • Goldman analysts laid out 15 under-the-radar, “quality” stock picks in a note to clients on Friday.
  • See more stories on Insider’s business page.

The growth-to-value rotation and so-called reflation trade have been the dominant market narratives in the past few months.

Groups of investors looking to take advantage of the economic reopening piled into value-oriented stocks that had been long abandoned in favor of high-flying growth names and tech shares.

Reflation trade believers put their money to work in energy and financial stocks, among others, hoping to profit from what some experts say will be 7% annual growth in the US economy in 2021 post-pandemic.

Now though, those trades are getting crowded, and investment banks like Goldman Sachs are recommending clients look for safety in companies with strong free cash flow generation and more sensible valuations.

Goldman’s economists believe the growth seen in the US economy will peak at 10.5% in the second quarter before decelerating into 2022. The bank says this could hurt returns and create increased volatility for investors.

With this in mind, it’s time for investors to look for “quality,” according to the experts at Goldman.

In a Friday note to clients, Goldman analysts led by Deep Mehta said that there are many ways to define “quality,” but they believe it encompasses “a track record of strong asset productivity and financial returns as well as cash generation.”

Goldman analysts compiled a list of 15 such stocks for investors, but not only are these stocks “quality” options, they’re also contrarian plays.

Goldman found 15 underappreciated “quality” stocks where their analysts are “out-of-consensus,” meaning the majority of the Street is either “neutral” or “sell” rated while they hold a “buy” rating.

Investors looking to generate alpha with a contrarian view should look no further – compiled below are 15 contrarian, “quality” stocks that Goldman believes offer at least 10% upside by year-end.

Insider has also provided ticker and sector information, upside figures based on the analysts’ price targets, the percentage by which Goldman’s EPS or EBITDA targets exceed consensus levels, and the percentage of “buy” or equivalent ratings from the Street. The following data is as of June 18.

1. Hyatt Hotels Corp.

Hyatt Hotels Stock Chart


Ticker: H

Sector: Gaming, Lodging, and Leisure

% of “Buy” Ratings: 5%

GS vs. consensus on 2021 EBITDA: 36%

Upside to Target: 26%

Source: Goldman Sachs

2. KeyCorp

Keycorp Stock Chart


Ticker: KEY

Sector: Regional Banks & Consumer Fin

% of “Buy” Ratings: 29%

GS vs. consensus on 2021 EPS: 4%

Upside to Target: 14%

Source: Goldman Sachs

3. Marriott International

Marriott Stock Chart


Ticker: MAR

Sector: Gaming, Lodging and Leisure

% of “Buy” Ratings: 32%

GS vs. consensus on 2021 EBITDA: 20%

Upside to Target: 14%

Source: Goldman Sachs

4. Occidental Petroleum Corp.

Occidental Stock


Ticker: OXY

Sector: E&P

% of “Buy” Ratings: 32%

GS vs. consensus on 2021 EBITDA: 9%

Upside to Target: 18%

Source: Goldman Sachs

5. Pentair Plc

Pentair stock chart


Ticker: PNR

Sector: Clean Energy

% of “Buy” Ratings: 37%

GS vs. consensus on 2021 EBITDA: 6%

Upside to Target: 15%

Source: Goldman Sachs

6. Grocery Outlet Holding

Grocery Outlet stock chart


Ticker: GO

Sector: Retail Specialty Hardlines

% of “Buy” Ratings: 40%

GS vs. consensus on 2021 EPS: 5%

Upside to Target: 17%

Source: Goldman Sachs

7. ViacomCBS Inc.

Viacom CBS stock chart


Ticker: VIAC

Sector: Telecom & Cable

% of “Buy” Ratings: 40%

GS vs. consensus on 2021 EPS: 4%

Upside to Target: 79%

Source: Goldman Sachs

8. Amgen Inc.

Amgen stock chart


Ticker: AMGN

Sector: Telecom & Cable

% of “Buy” Ratings: 43%

GS vs. consensus on 2021 EPS: 6%

Upside to Target: 21%

Source: Goldman Sachs

9. Infinera Corp.

Infiniera Corp stock chart


Ticker: INFN

Sector: Hardware and Comm Tech

% of “Buy” Ratings: 43%

GS vs. consensus on 2021 EPS: >100%

Upside to Target: 18%

Source: Goldman Sachs

10. Par Pacific Holdings

Par Pacific Stock chart


Ticker: PARR

Sector: Integrated Oil and Refiners

% of “Buy” Ratings: 43%

GS vs. consensus on 2021 EBITDA: 21%

Upside to Target: 18%

Source: Goldman Sachs

11. Caterpillar Inc.

Cat stock chart


Ticker: CAT

Sector: Machinery & Diversified Industrials

% of “Buy” Ratings: 44%

GS vs. consensus on 2021 EPS: 12%

Upside to Target: 20%

Source: Goldman Sachs

12. Moderna Inc.

Moderna stock chart


Ticker: MRNA

Sector: Biotechnology

% of “Buy” Ratings: 44%

GS vs. consensus on 2021 EPS: 15%

Upside to Target: 15%

Source: Goldman Sachs

13. Tesla Inc.

TSLA stock chart


Ticker: TSLA

Sector: Autos & Industrial Tech

% of “Buy” Ratings: 44%

GS vs. consensus on 2021 EBITDA: 11%

Upside to Target: 42%

Source: Goldman Sachs

14. Tyson Foods Inc.

Tyson Foods stock chart


Ticker: TSN

Sector: Agribusiness & Packaging

% of “Buy” Ratings: 47%

GS vs. consensus on 2021 EBITDA: 2%

Upside to Target: 19%

Source: Goldman Sachs

15. Waste Management Inc.

WM stock chart


Ticker: WM

Sector: Machinery & Diversified Industrials

% of “Buy” Ratings: 47%

GS vs. consensus on 2021 EBITDA: 2%

Upside to Target: 11%

Source: Goldman Sachs

https://markets.businessinsider.com/news/stocks/goldman-sachs-stock-picks-to-buy-2021-year-end-upside-2021-6-1030541817

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