Investing

5 Stocks on Goldman Sachs Conviction List With Massive Upside Potential

Lee Jackson

Published: February 6, 2019 7:05 am

Last Updated: March 13, 2020 3:11 pm

With 2019 off and running and the first quarter now almost half over, many investors are resetting for what could be a more volatile remainder of the year as the ongoing trade and political issues could continue to stir the pot some. While the rally of the past six weeks has been very positive, it makes sense for investors to find the best possible stock ideas from the top analysts and firms.

One of Wall Street’s most respected lists of stocks to buy is the Goldman Sachs Conviction List of companies. These are the firm’s top picks for high net worth and institutional accounts spread across all S&P 500 sectors. We screened the list looking for the companies with the largest upside to the Goldman Sachs assigned target prices. We found five that aggressive accounts may want to add to portfolios.

Alaska Air

This company has a big west coast exposure and continues to rank high on Wall Street. Alaska Air Group Inc. (NYSE: ALK) is the parent company of Alaska Airlines, and it reported impressive traffic data buoyed by strong demand. The company serves more than 100 cities through an expansive network in Alaska, the Lower 48 states, Hawaii, Canada and Mexico. Despite recent challenges by other carriers for superiority in the Northwest, the company has strong customer loyalty, which has contributed to outstanding earnings and revenue growth.

Last year the company began nonstop service between Mineta San Jose International Airport and John F. Kennedy International Airport in New York City. With the addition of the new service, Alaska now operates 15 flights a day to JFK from six west coast gateways, including Las Vegas; Los Angeles; Portland, Oregon; San Francisco; San Jose; and Seattle.

The Goldman Sachs price target for the shares is $90, while the Wall Street consensus target is $81.50. The shares closed Tuesday’s trading at $64.74. Hitting the Goldman Sachs target would be almost a 40% gain for investors.

BioMarin Pharmaceuticals

This is a Wall Street favorite, and it posted solid earnings last year. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.

Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there.  Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is heavily focused on oncology drugs and invests heavily in early-stage molecules.

The fourth quarter historically has been a strong quarter for BioMarin. Most analysts that cover the company would not be surprised if fourth-quarter results beat consensus again. Three-year durability data from Valrox is expected midyear, which many believe is the most important data readout in 2019 for BioMarin, given the uncertainty.

Goldman Sachs has a price objective of $167, while the posted consensus price objective is $120.59. The stock closed trading at $97.58 on Tuesday. The upside to the Goldman Sachs target is right at 70%.

DXC Technology

This company may be somewhat off-the-radar for investors, but it is well-liked at Goldman Sachs and across Wall Street. DXC Technology Co. (NYSE: DXC) is the world’s second-largest pure-play information technology services firm, behind only Accenture, and it has generated around $25 billion in annual revenues.

The company has a whopping 170,000 employees, with an offshore mix of around 50% services around 6,000 clients in a wide range of corporate verticals. It has a presence in over 70 countries, with the Americas representing around 50% of total revenues.

DXC Technology shareholders are paid a small 1.19% dividend. The $106 Goldman Sachs price target is well above the $83.95 consensus price objective. The shares closed trading on Tuesday at $64.71 apiece. Hitting the Goldman Sachs target would be a 65% gain.

NetApp

NetApp Inc. (NASDAQ: NTAP) is a top technology play at Goldman Sachs. The company provides software, systems and services to manage and store computer data worldwide. It offers flash; flash arrays that support data management; hybrid arrays to deploy the speed of flash storage; hybrid cloud; ONTAP cloud storage data management service; NetApp cloud sync hybrid data management software as a service; NetApp private storage for cloud; and AltaVault cloud-integrated solutions.

The company has gained significant share both in overall external storage and in the fast-growing all-flash array market, and many analysts believe that NetApp could be a potential takeover target.

Shareholders of NetApp are paid a 2.37% dividend. Goldman Sachs has set its price objective is $94. The posted consensus target price is $84.05, and the stock closed most recently at $67.65 per share. The upside to the Goldman Sachs target is a huge 47%.

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Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.

Pioneer is a huge player in the Permian Basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian as it expects to deliver solid production growth in 2019 and beyond.

The company’s unmatched depth of low-cost inventory and balance sheet allow it to compete favorably in both mild and moderate recovery case scenarios. In addition to asset and financial strength, many analysts feel that Pioneer offers the second highest multiple contraction among the large-cap Permian pure-play peers, as well as the highest free-cash-flow yield.

Investors are paid a tiny 0.22% dividend. The Goldman Sachs price target is $202. The consensus price figure is higher at $208.55, but the stock closed trading on Tuesday at $143.59 a share, more than 40% below the Goldman Sachs target.

These five top stocks across five sectors offer tremendous upside to the Goldman Sachs price objectives, and while there is no guarantee they get there, moving just halfway to the targets would be outsized gains for investors.