RBC Capital has now released updated guidance for its Top 30 Global Ideas for 2018. From this list of 30 stock picks, we select only the 10 stocks with a Strong Buy consensus from the Street. Even in these times of volatility, this list shows that there are still compelling opportunities out there.
Year-to-date, RBC Capital says its top 30 list has significantly outperformed the MSCI Developed World Index, which makes this a very interesting list indeed… Here we look at the second five of these top stocks- for the first five read our previous blog post here.
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1. DowDuPont Inc (NYSE:DWDP)
Welcome to our first stock: DowDuPoint Inc. the world’s largest chemical company. This new company is the result of a massive tie up between Dow Chemical and Du Pont back in August 2017. Looking forward, DWDP is due to split into three publicly-traded companies agriculture, materials science and specialty products.
For RBC’s Arun Viswanathan, DWDP is poised to soar 47% in the coming months: “We see a re-rating opportunity from ~9x to 10x+ as DWDP delivers on synergies (potential upside in procurement/revenue) and splits into three (and ultimately more) entities. We are modeling $3.3B synergies, but see upside to $3.5-4B.” He notes that the market has a track record of successful pure play spin offs and sees DWDP reaching $93 from $63 currently. Indeed, as we can see from the screenshot below the overall Street outlook is decidedly bullish:
2. ServiceNow (NYSE:NOW)
TipRanks reveals that RBC Capital’s Ross MacMillan is the third best-performing analyst out of over 4,700. He has a mind-blowing track record over the last 1 year with an 85% success rate and 26.6% average return. Right now, his top stock pick is Californian cloud computing company ServiceNow. Prices can reach $180 says MacMillan (11% upside).
“We are bullish on the company’s ability to take share in the IT Service Management (ITSM) market as ServiceNow becomes the “ERP” [enterprise resource planning] for IT.” Moving beyond IT, MacMillan sees ServiceNow expanding into enterprise as customers and partners write custom SaaS for HR, finance, facilities, legal, procurement, etc. on its platform. You can click on the screenshot below to see why other analysts share his bullish perspective:
3. Air Lease Corporation (NYSE:AL)
With an ‘outstanding’ management team, five-star RBC Capital analyst Jason Arnold sees Air Lease spiking to $87. That indicates massive upside potential from the current share price of over 100%. Note that this comes in way above the Street consensus of $62 (45% upside potential).
Arnold explains why he is so much more bullish than consensus here: “Our Top Pick rating on Air Lease Corp is driven by the following key fundamental factors, along with what we view as the currently very attractive valuation: 1) leading aircraft lessor; 2) growing portfolio and EPS outlook; and 3) highest return on equity (ROE) and lowest leverage in sector.”
4. Dollar Tree (NASDAQ:DLTR)
Discount store Dollar Tree is defying challenging retail conditions with high single-digit sales growth. Five-star RBC analyst Scot Ciccarelli sums up his DLTR investment thesis here: “We believe Dollar Tree’s stores remain highly attractive to consumers. We think that the company’s expanded food and consumables offering has greatly increased Dollar Tree’s addressable customer market, and that its stores continue to draw a broad cross-section of consumers.”
Ciccarelli is modeling for a 12% rise in share prices to $106. Note that DLTR has a Moderate Buy analyst consensus rating based on all ratings from the last three months. However, if we look at only ratings from the best-performing analysts, the consensus shifts to Strong Buy.
5. Broadcom (NASDAQ:AVGO)
Leading semiconductor stock Broadcom is RBC’s Amit Daryanani’s No. 1 pick right now. “AVGO has beat Street quarterly EPS estimates every quarter since its IPO. Management is disciplined in M&A, focusing on slower-growing companies that compete in oligopolistic industries with cost-cutting potential.” Meanwhile the Brocade acquisition should generate meaningful margins.
In the next 12 months, this Top 20 analyst sees AVGO rising 37% to hit $325. Most encouragingly, his bullish take is firmly echoed by the Street. We can see here how AVGO has only received 1 hold rating in the last three months vs 21 buy ratings:
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