Investing

8 Top Picks From Credit Suisse With Implied Upside of 50% or More

Jon C. Ogg

Published: July 12, 2018 12:10 pm

Last Updated: January 11, 2020 9:07 pm

Investors have been finding it harder to generate positive returns in 2018 than in 2017 and the few prior years. The bull market is effectively nine years old, and trade wars, rising interest rates and a slowdown in some of the expectations of global growth are some of the variables making it more difficult for investors to decide how to best position their investment portfolio.

Credit Suisse has refreshed its list of Top Picks. With this group of 91 stocks, the team of analysts uses a bottom-up approach for growth and value over the coming six-month to 12-month period. While this is specifically not meant to be a selection of new portfolio picks, and while some of these top picks have had Outperform ratings from the firm for quite some time, it turns out that after screening the group that eight of the 91 picks had implied upside of 50% or more.

Investors need to understand that traditional new Buy and Outperform ratings generally come with implied upside of 8% to 10% at this stage of the bull market. So if upside of 50% is projected, it either means that there is more risk or it may be a situation in which the stock price has pulled back substantially from its highs.

24/7 Wall St. screened the list of 50% upside picks from Credit Suisse’s top picks and we included other metrics. We included a trading range in the past year and the Thomson Reuters consensus analyst price target. We also included the performance so far in 2018 to show if this pick from the firm has been a dud in 2018 or the firm just sees a lot more growth ahead. Additional color has been added on some of the Credit Suisse top picks as well.

BlackRock

BlackRock Inc. (NYSE: BLK) has a $743 price target at Credit Suisse, implying upside of 49% from the current $499.50 share price, but the 2.3% dividend yield gets this one up to the 50% threshold for total return investors. BlackRock has a consensus price target of $608.58 and a 52-week range of $408.62 to $594.52. Year to date, the stock is down 2%.

BlackRock owns the largest exchange traded fund (ETF) manager in the world via its iShares unit. The firm views ETF and passive investing segments as high growth, and it believes that the company will capitalize on the secular trends.

Caterpillar

Caterpillar Inc. (NYSE: CAT) was last seen at $141.25 on the Credit Suisse view, and the firm’s $210 price target implies upside of almost 49%. The consensus price target is $175.03, and the 52-week range is $105.11 to $173.24. Year to date, the stock is down 13%.

While Caterpillar has major trade war risks, Credit Suisse believes that many of the concerns around its end markets peaking are simply overdone. Mining, Latin American construction, drilling, oil production, power generation, locomotive and marine are all pointed out as remaining well below historical levels. The firm also thinks that the market forgets how deep the recent industrial recession was and that this is currently only in the second year of a recovery, while historically cycles last five to six years.

Deere

Deere & Co. (NYSE: DE) was last seen at $144.55, and the Credit Suisse target price of $231 implies upside of almost 60%. The consensus analyst target is $186.18, and a 52-week range is $112.87 to $175.26. Year to date, the stock is down nearly 10%. The top picks summary on Deere noted this:

We still believe that Deere will be the breakout stock for the Machinery group with markets that have only modestly started to recover off a bottom and with plenty of room for upside which brushes off any skepticism on peak demand that other names are facing. At the same time Deere’s story into 2019 looks even more encouraging regardless of end market demand.

MetLife

MetLife Inc. (NYSE: MET) has a price target of $67 at Credit Suisse, implying upside of 52% from the $43.85 share price. It has a consensus price target of $53.82 and a 52-week range of $43.09 to $55.91. Year to date, the stock is down nearly 13%.

The Credit Suisse view is that MetLife has a relatively high degree of control over its future success, when considering its strong retirement and group benefits, as well as its international businesses. These are all said to have a low sensitivity to equity market fluctuations. It also has divested its variable annuities business, which will allow large one-time charges seen in recent years to ease.

Micron Technology

Micron Technology Inc. (NASDAQ: MU) has a price target of $90 at Credit Suisse, implying upside of 61% from the $55.74 reference price. The consensus price target is $80.93. The 52-week range is $26.85 to $64.66. The stock is up about 32% year to date.

Micron’s memory business is still viewed as cyclical, but Credit Suisse sees the current environment as more sustainable. The company has China exposure concerns but there are many areas for Micron to still find growth in newer segments emerging in technology under new leadership.

Switch

Switch Inc. (NYSE: SWCH) was last seen with a $19 Credit Suisse price target, which implies some 52% upside from its reference price of $12.50. It has a consensus price target of $17.00 and a 52-week range of $11.85 to $24.90. Year to date, the stock is down 31%.

Credit Suisse sees Switch growing its revenues at roughly twice that of the data center market, and 2019 revenue is expected to accelerate to about 21% growth after completing its four data center campuses. Switch is said to offer immense power at cheaper rates and its facilities are strategically located to provide additional cost savings to customers.

U.S. Steel

United States Steel Corp. (NYSE: X) is an obvious trade war and tariff stock, due to its steel exposure, and Credit Suisse’s $55 price target implies just over 50% upside from the reference price of $36.53. U.S. Steel has a consensus price target of $45.69. The 52-week range is $22.38 to $47.64. Year to date, the stock is up 3%. Credit Suisse’s summary said:

The US flat rolled market is expected to remain very tight, as a) seasonal demand is accelerating, b) scrap prices remain robust, and c) S/D fundamentals benefit from limited imports and a strong US/global economy. We like X for its strong leverage to the cycle, accretion from its “A” and “B” Granite City BF restarts, and potential asset sales as the company refocuses on its core steelmaking operations.

Azure Power

Azure Power Global Ltd. (NYSE: AZRE) has been listed last as it is a small cap stock, with a $335 million market cap, in the alternative energy area in Credit Suisse. Many investors may not even know about this company. This stock has a $24 price target, which was 65% higher than the $14.50 reference price. Azure Power has a consensus price target of $23.00, and the 52-week range is $12.53 to $18.10. Year to date, the stock is up 3%. Credit Suisse’s summary on Azure said:

Long-term value creation driven by attractive project economics, visible contracted and funded growth (2.1GW contracted), differentiated in-house EPC, and strong policy support in India for growth. Stock trades below DCF of long-term contracted cash flows with low counterparty credit risk.