Investing

Top RBC Stock Picks With as Much as 100% Upside Potential

Lee Jackson

Published: December 3, 2015 8:25 am

Last Updated: January 13, 2020 4:32 pm

As we have reported recently, many of the top firms on Wall Street that we cover at 24/7 Wall St. have made some final tweaks and changes to their top stock pick lists that they provide to institutional and high net worth clients. With this year proving to be a grind for investors, and the S&P 500 just barely positive, now is a good time for investors to maybe shed some losers and add some new stocks for the stretch run and 2016.

The RBC U.S. Equity Top Picks list has handily outperformed the S&P 500 this year and since inception. While the list is far more concentrated with only 20 positions, that puts a huge emphasis on the analysts to pick winners. We report on the changes to the list, and also screened for the stocks to buy with the biggest upside to the RBC price targets.

Louisiana-Pacific

This top materials company is added to the list, and the timing could be outstanding. Louisiana-Pacific Corp. (NYSE: LPX) is a leading manufacturer of quality engineered wood building materials, including oriented strand board, structural framing products and exterior siding for use in residential, industrial and light commercial construction. From manufacturing facilities in the United States, Canada, Chile and Brazil, LP building products are sold to builders and homeowners through building materials distributors and dealers and retail home centers.

The RBC price target for the stock is $22, and the Thomson/First Call consensus objective is $17.96. The stock closed most recently a $17.41.

Air Lease

This transport leasing company could have huge upside for investors if the RBC team is right. Air Lease Corp. (NYSE: AL) engages in the purchase and leasing of commercial jet transport aircraft to airlines worldwide. It also sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies and airlines. In addition, the company provides fleet management services to investors and owners of aircraft portfolios. As of December 31, 2014, the company owned a fleet of 213 aircraft, including 163 single-aisle narrow-body jet aircraft, 32 twin-aisle wide-body jet aircraft and 18 turboprop aircraft.

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RBC cites the company’s industry leading upper teens potential return on equity, which is well above peers and most financial companies, and the lowest leverage in the sector, making debt coverage much easier. The firm also is very positive on the significant excess cash flow generation, which goes toward financing new aircraft and paying down borrowings.

The RBC price target is a gigantic $70, and the consensus target is much lower at $46.25. The stock closed Wednesday at $34.03, so trading to the RBC target would be over a 100% gain.
Brookdale Senior Living

This is a top play on the aging demographic in the United States, though the stock has been hit very hard since June, down almost 40%. Brookdale Senior Living Inc. (NYSE: BKD) is the leading operator of senior living communities throughout the United States. It provides senior living solutions primarily within properties that are designed, purpose-built and operated to provide the highest-quality service, care and living accommodations for residents.

Currently, Brookdale operates independent living, assisted living and dementia-care communities and continuing care retirement centers, with approximately 1,135 communities in 47 states and the ability to serve over 110,000 residents. Through its ancillary services program, the company also offers a range of outpatient therapy, home health, personalized living and hospice services.

Some on Wall Street think that the real estate the company owns alone is worth $27 per share. RBC feels that there is significant operating leverage in the company’s existing portfolio, as an uptick in the residential housing market or general consumer confidence could help to improve occupancy, which would carry high incremental margins and significant leverage.

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RBC has a price target of $37, and the consensus target is $33.88. The stock closed on Wednesday at $22.54. Trading to the RBC target would be a monster 63% gain.

Endo Health Solutions

This is the top pick at RBC and could hold incredible potential for patient investors. Endo International PLC (NASDAQ: ENDP) received FDA approval for a new drug that generated a sizable milestone payment to the company’s partner. This specialty health care company is focused on branded and generic pharmaceuticals and devices worldwide.

The company took a huge hit due to the issues with Valeant and may be offering patient investors an incredible entry point. The company answered the big drop by pointing out that the percentage of the company’s projected U.S. Branded 2015 revenues at the midpoint of 2015 guidance, that flow through specialty pharmacies is less than 10%, which represents approximately 3% of the company’s projected overall 2015 revenues. Endo also pointed out that the specialty pharmacies it uses are fully independent of the company. It does not have any ownership interest in, consolidate any financial results of, or have affiliations with any specialty pharmacy.

The RBC price target is a huge $91, while the consensus target is $84.06. Shares closed Wednesday at $61.55. Trading to the RBC target would be a large 45% gain.

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The unique aspect to the RBC list, versus many on Wall Street, is it not jammed with crowded trade stocks. It also tends to take a more contrarian view than other lists. The stocks make good sense for growth portfolios with a longer time horizon.