Well that came around quickly! We are now drawing to the end of 2018. And that can only mean one thing: it’s time to think about 2019. Chances are high that the volatility plaguing the markets in 2018 isn’t going anywhere next year. With that in mind, you need to be extra careful about how you re-balance your portfolio for the new year.
So let’s turn to a report from Goldman Sachs that highlights exactly the kind of stocks you want to be thinking about right now.
These are ‘high quality’ stocks specially selected by the firm. And by ‘high-quality’ Goldman Sachs means stocks that meet the following 5 factors: strong balance sheets, stable sales growth, low deviation in operating income, low stock drawdown risk, and return-on-equity that exceeds peers.
In other words, these stocks are the best-positioned to 1) withstand an economic slowdown; and 2) diminishing equity returns.
On top of that we used TipRanks‘ stock data to find out what other top analysts have to say on these stocks. That way we can highlight stocks with the most bullish Street consensus from Goldman Sachs’ list.
Let’s take a closer look at these top stock picks for 2019 now. Here we cover the first 4 stock picks, and we will reveal the following 4 stock picks in the next newsletter:
1. Alphabet (GOOGL)
Tech stocks may be going through a rough patch, but here’s one mega cap Goldman Sachs thinks is still worth buying for 2019.
Trading at ~11x 2019 EV/EBITDA, Alphabet Inc’s (GOOGL– Research Report) valuation looks compelling, says Brent Thill (Track Record & Ratings) of Jefferies. He picks GOOGL as his Franchise Pick i.e. a high conviction stock. This is with a juicy $1,450 price target (37% upside potential).
So what justifies this bullish call?
“The Internet Team remains bullish on Alphabet due to continued expected mobile search growth and a positive stance on YouTube” explains Thill.
Online video is lining up as the biggest online ad growth driver — with GOOGL’s YouTube capable of driving meaningful upside by stealing ad budgets away from television.
Meanwhile, “mobile search has been the number one driver of revenue growth for the past several quarters and the team sees continued opportunity given the ubiquity of smartphones and the important location and contextual signals from mobile devices” writes Thill.
Plus, Alphabet also boasts its fast-growing Google Cloud, and a strong leadership position in both AI and autonomous vehicles. Its Waymo vehicles have driven many millions of miles on public roads more than peers.
Taking a step back, we can see that out of 31 analysts polled recently, 28 are bullish on the stock. This is with a $1,346 average price target (28% upside potential).
2. Comcast (CMCSA)
Blue chip telecoms giant Comcast Corporation (CMCSA– Research Report) is a worthy 2019 stock pick. CMCSA stock has an extremely stable portfolio and growing free cash flow.
Not only is its credit high-quality, but its dividend is ‘sacrosanct’, and it repurchases shares when it’s not deleveraging from strategic M&A.
“CMCSA is arguably more a safety stock than a growth stock. While its valuation is modest we’d argue so is its risk” writes RBC Capital’s Steven Cahall (Track Record & Ratings).
He has just ramped up his price target to $45, citing the recent $15 billion deal for Sky. From current levels this means we are looking at upside potential of 19%.
“Excuse Me While I Kiss the Sky” Cahall calls his report, adding “We see the strategic merits of Sky being better appreciated in time.”
True CMCSA paid a hefty multiple, but Cahall sees long-term strategic benefits from Sky, ranging from a bigger subscriber base for emerging tech investments to savings on content acquisition and accelerated advanced advertising.
This ‘Strong Buy’ stock scores 15 buy ratings vs 3 hold ratings. Its $44 average analyst price target suggests 16% upside potential. See what other Top Analysts are saying about CMCSA.
3. O’Reilly Automotive (ORLY)
O’Reilly Automotive Inc (ORLY– Research Report) is one of the largest specialty retailers of auto parts in the US, with over 5,000 stores. Already, year-to-date, shares are exploding by over 45%. And the stock has a long growth runway ahead.
Alongside Goldman Sachs, RBC Capital’s Scot Ciccarelli (Track Record & Ratings) is also a big fan of the stock.
“O’Reilly is a net market share gainer in an attractive industry,” says the analyst. And he sees four key reasons why ORLY is set to outperform. Namely: 1) strong pricing power, 2) little threat from e-commerce because the parts are too complex, 3) increasing number and age of vehicles and 4) a highly fragmented industry.
Further, steady ORLY stock performance suggests that the company is feeling little effect from price transparency/ e-commerce competition.
“Given the company’s highly consistent top/ bottom line growth we remain buyers of ORLY,” sums up Ciccarelli. He sees shares surging 10% to hit $389.
Now if we look at all analysts, the consensus is a cautiously optimistic Moderate Buy. However, if we shift to only the Street’s best-performing analysts, then the consensus also upgrades to Strong Buy. This is with a $380 average analyst price target (8% upside potential). See what other Top Analysts are saying about ORLY.
4. Cognizant (CTSH)
Goldman Sachs has just upgraded software stock Cognizant Technology Solutions Corp (CTSH– Research Report) from Hold to Buy. The firm’s James Schneider (Track Record & Ratings) also raised his price target for the shares to $84 from $81. He now predicts shares have 20% upside ahead.
Improving revenue growth brings prospects for a stock “re-rating,” Schneider told investors. Plus a rebound in the company’s Financial Services vertical should drive improved revenue growth in the near term.
This bullish analysis is echoed by other analysts. For example, Loop Capital’s Joseph Vafi has a Street-high $94 price target on shares (35% upside potential). Following the company’s upbeat analyst day, Vafi is even more confident in the company’s unique offer of a “full spectrum of services demanded by Fortune 500 CIOs”.
CTSH has now “successfully pivoted its business to the most leading-edge service capabilities,” and the bear case should be “put to bed”, especially given the forecast of improving margins in 2019.
Meanwhile valuation provides a positive risk/reward opportunity, with a roughly 60% multiple discount to Accenture’s PE in 2019, despite similar aggregate growth rates and higher margins. See what other Top Analysts are saying about CTSH.
Enjoy Research Reports on the Stocks in this Article:
Alphabet (GOOGL) Research Report
Cognizant (CTSH) Research Report
Comcast (CMCSA) Research Report
O’Reilly Auto (ORLY) Research Report
You can research more potential investments with TipRanks’ stock screener tool. The screener covers more than 5000 stocks and offers a range of filters to refine your search. It’s everything you need to get the best information for smart investing. Go to the Stock Screener now.
