According to leading banks, the evidence of an upcoming downturn is growing. HSBC, Citigroup and Morgan Stanley have all noted a trading pattern breakdown — a signal to get out soon — according to Bloomberg. Meanwhile, Goldman Sachs CEO Lloyd Blankfein made headlines recently when he said he sees something in the market that ‘unnerves’ him. “The biggest problem, the anxiety that people have, is non-specific to what asset we are pointing to but the general feeling that things have been going up for too long,” Blankfein commented.
In this environment, investors need to find the toughest stocks that can withstand a downward shift in the market. Here we looked for five stocks that all have a ‘Strong Buy’ rating from the Street’s best analysts. These are the analysts with the highest success rate and average return according to TipRanks, which ranks over 4,600 analysts covering over 5,000 stocks.
Following only the top analysts provides a degree of reassurance in volatile times that you can trust the analyst you are following. And we can also ensure that the price target from top analysts provided compelling upside for the stock in question. At the same time, we also searched specifically for stocks that can keep outperforming in a downturn. This can be because of the nature of the industry, say healthcare, or because of the glowing fundamentals of the stock itself.
Now let’s take a closer look at these top five stocks:
1. Celgene Corporation (NASDAQ:CELG)
Healthcare stocks are a strong choice in times of volatility. So says Merrill Lynch which recently released a report stating that health care stocks are close to all-time low valuations despite continuing upside surprises. In particular, the health care sector also stands to benefit from ageing populations while also offering growth at acceptable prices. And this large-cap biotech is no exception.
CELG has a Strong Buy analyst consensus rating with 16 buy ratings in the last three months versus just two hold ratings. Meanwhile the average analyst price target of $156 comes in at 9.5% upside to the current share price. In particular, top Jefferies analyst Michael Yee believes Celgene shares will move higher over the next few months and into 2018 with the release of three major Phase III datasets: GED-301 in Crohn’s, Ozanimod in ulcerative colitis and partner Acceleron’s luspatercept in beta-thalassemia. He has a $160 price target on the stock (12% upside).
2. Alibaba Group (NYSE:BABA)
Yes, Chinese e-commerce giant Alibaba is a consumer stock. And yes, traditionally consumer stocks are hit hard during a downturn. But if there is one tough consumer stock out there, it’s Alibaba. Indeed, even when China’s economy slowed down during 2016, Alibaba revenues continued to soar. BABA benefits both from the increase in digital shopping, and from selling some of the cheapest products in the market.
This model has certainly won the Street’s backing. In the last three months, BABA has received an impressive 12 back-to-back buy ratings from top analysts with no sell or hold ratings. These analysts predict that the stock has further upside potential of over 15%.
MKM Partners’ Rob Sanderson goes one step further. He says BABA can reach $220 as it has the best fundamentals out of all the internet mega caps. His $43 price target increase is a reflection of “50 percent organic growth in the segment, strong secular trends, dominant market position and [a] 60-percent margin while funding significant investments.” Meanwhile, on September 26 four-star Wells Fargo analyst Ken Sena came out with BABA’s highest price target yet of $225 (31% upside potential).
3. Idexx Laboratories (NASDAQ:IDXX)
You may not know it but The Pet Passion index, Motif Investing’s tracker of pet-related companies, returned 19% from August 2016 to August 2017. In contrast, the S&P 500 grew by 8.5% in the same time period. And this trend isn’t just for the good times. In previous recessions, pet spending continued to rise even while overall consumer spending fell.
One key company to benefit from the influx of money is Idexx Laboratories a veterinary diagnostics company. It has a ‘Strong Buy’ analyst consensus rating and upside potential of 15% from the current share price. Merrill Lynch’s Derik de Bruin recently upgraded the stock from hold to buy with a $175 price target. If Idexx is a dog, it would be a ‘top dog’ says de Bruin who likes IDXX’s long-term target of 10% organic revenue growth.
Meanwhile, five-star Canaccord Genuity analyst Mark Massaro applauds the stock’s “multi-pronged growth drivers.” He comments “We continue to believe that IDXX’ positioning is dominant and hardly rivaled, in the backdrop of robust global vet demand that we think lasts for at least another two years.” Massaro has a $180 price target on the stock (15% upside).
4. Mastercard (NYSE:MA)
Payment processing giant Mastercard Inc is one of the strongest payment companies out there. As the world increasingly moves away from cash and towards digital payments, MA stands to reap the rewards.
Shares have been rising steadily over the year and are now trading at around the $140 mark. Meanwhile the stock has an impressive ‘Strong Buy’ analyst consensus rating with 13 straight buy ratings. Encouragingly, top analysts have particularly bullish price targets. For example, Nomura’s Bill Carcache has the highest MA price target of $163 (16% upside). And Carcache has one of the best track records with his Mastercard ratings. Across his 17 MA ratings, he has a 94% success rate and 30% average return.
At the same time, note that RBC Capital and Morgan Stanley have both significantly raised their MA price targets (by $16 and $22 respectively). Top Morgan Stanley analyst James Faucette (who now has a $156 price target on the stock) believes that MasterCard can deliver accelerated organic growth revenue in 2018. He says the market is not fully appreciating the multiple positive catalysts on the stock including a shift to e-commerce and e-payments as well as growing demand for services like fraud detection and remediation.
5. Alexion Pharmaceuticals (NASDAQ:ALXN)
To round off the list we have another healthcare stock: global biopharma Alexion Pharmaceuticals. ALXN has spiked in the last three months from $120 to $140. The good news is that the Street predicts that Alexion still has serious growth potential. Top analysts have an average analyst price target on the stock of $161 which works out at just over 15% from the current share price. We can also see how, in the last three months, 10 out of 12 top analysts have a bullish sentiment on ALXN’s outlook.
Take, for example, top Leerink Swann analyst Geoff Porges. He reiterated his ALXN buy rating on September 25 with a $182 price target (30% upside potential). Porges believes that Alexion’s Soliris for the treatment of blood disorders will continue to show dominance all the way through into 2020. Even then its biggest challenge will be from Alexion’s own next generation complement inhibitor, ALXN1210. So far Soliris is the only terminal complement inhibitor on the market- and is more effective than any of rival offerings that have advanced to pivotal trials says Porges.
According to Alexion, Soliris works by inhibiting terminal complement, a part of the immune system. When activated in an uncontrolled manner, this complement plays a role in serious diseases like paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS).
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