While 24/7 Wall St. covers many top analyst upgrades, downgrades and initiations each day of the week, there is a separate class of these upgrades that always garners more widespread attention than routine upgrades or reiterations of Buy and Outperform ratings. These are the conviction calls and the changes top firms make to top picks lists of stocks for upside.

For a firm to list a stock as a top pick, it implies stronger conviction for that upside. Credit Suisse has made seven additions to its list of 55 top picks. These all come with Outperform ratings, and generally the implied upside to the analyst price target ranges from 15% to over 50%.

Credit Suisse’s seven additions are listed as having the “highest conviction combined with the least demanding market expectations.” In short, they feel like these picks have very little in the way and that the companies can more easily get to their targets without a massive stock market rally.

At this stage in the recovery, and now that stock prices have recovered all or most of their panic selling losses from March, most implied upside on Buy and Outperform ratings is generally considered to be in the 8% to 10% range. For top picks and conviction picks that tends to be higher, hence the 15% to 50% range mentioned.

Remember that no analyst call, no matter how strong the conviction happens to be, should ever be used as the sole basis to buy or sell a stock. We have included consensus price targets from Refinitiv as a reference to show if Credit Suisse is more or less aggressive than other firms.

These are the seven new top picks from Credit Suisse for September of 2020.

Ares Management

Ares Management Corp. (NYSE: ARES) is a new top pick with an Outperform rating, and the Credit Suisse target price of $49 implies more than 24% upside, before adding in its 4% dividend yield for a total return. The firm’s six-month outlook is based on high visibility and it being positioned to thrive in a distressed cycle.

Credit Suisse sees the next two to three years with Ares earning an additional $350 million in incremental management fees without raising any additional capital. One aspect is $23 billion of shadow assets under management not yet turned on and new leverage rules under the business development company rules.

Ares Management stock has a 52-week trading range of $20.20 to $42.40, a consensus target price of $45.25 and a $5.7 billion market cap.

Ashland Global

Ashland Global Holdings Inc. (NYSE: ASH) has a $91 target price, up 24% from the last $73.50 share price seen, and it also comes with a 1.5% dividend yield. Credit Suisse’s bullish thesis is based on higher earnings before interest, taxes, depreciation and amortization improvement, market share gains ahead, cost-cutting opportunities, stronger free cash flow and a strong capital allocation focus that will be around buybacks in the near-term and mergers and acquisitions down the road.

Ashland Global stock has a 52-week trading range of $38.88 to $81.82, a consensus target price of $88.90 and a $4.4 billion market cap.

Carlisle

Carlisle Companies Inc. (NYSE: CSL) is a top roofing player. Credit Suisse’s $150 target price and Outperform rating imply an upside call of just over 23% to the $121.50 current share price. Its dividend yield is 1.7%. The firm believes that the investing community remains skeptical about the outlook of the commercial end-market, but Carlisle sells a non-discretionary essential product in its eyes.

Another boost here is that Credit Suisse points out that it is exposed to geographies, verticals and building types that are less affected than the commercial market overall. In the end, it sees Carlisle’s products set to outperform the market.

Carlisle Companies stock has a 52-week trading range of $97.55 to $169.86. Its consensus target price is $147.75, and it has a $6.9 billion market cap.

Change Healthcare Inc. (NASDAQ: CHNG) is another new Credit Suisse top pick with an Outperform rating, and its $16 target price implies upside of 11.5% from the $14.35 latest price. There is no dividend here, and it has only been public about a year.

Change Healthcare was said to have a diversified mix of revenue streams, where 75% to 80% of revenue is based on software as a service (SaaS), and the rest of its revenues are indexed to health care utilization. Its SaaS revenue provides a solid base with visibility even in a COVID-19 climate like today.

One headwind that was pointed out was that Change Healthcare’s volume-based revenue has been an issue since COVID-19 started and the deferrals or cancellations of elective surgeries were seen. Early trends in medical network activity reflect a quicker comeback than what was contemplated in the company’s guidance for the third quarter.

Change Healthcare’s 52-week trading range is $6.18 to $17.57. It has a consensus analyst target of $17.32 and a $4.4 billion market cap.

Concho Resources

Concho Resources Inc. (NYSE: CXO) is an energy pick that was added to the Top Picks list at Credit Suisse and its $70 price target implies more than 53% upside from the most recent price of $45.50. Coming out of the downturn, Concho is deemed to be in the right focus in exploration and production with low-leverage, no near-term debt maturities, and low costs that can still fund capital spending and dividends with oil at $40 to 45 per barrel.

Credit Suisse’s notes also point out that Concho is one of the best positioned to generate attractive returns and free cash flow yields when oil prices eventually recover to mid-cycle levels. On top of the November election and the 2021 guidance, the firm points out that Concho’s large resource size and inexpensive valuation should have investors viewing it as being among the most likely takeover candidates.

Concho Resources has a 52-week range of $33.13 to $93.34, and a consensus target price of $73.27 and $8.9 billion market cap.

Mondelez

Mondelez International Inc. (NASDAQ: MDLZ) is a new top pick, with its food offerings, and the $64 price target implies a gain of 12%, before factoring in the 2.2% dividend yield. Credit Suisse sees a broad international footprint with great brands, and it likes that 70% of its sales are in international markets and 40% in developing markets.

The firm sees Mondelez as well positioned to capitalize on economic growth abroad as the pandemic comes under control and being set to adapt to a rapidly changing economic environment. Under its new strategy, Mondelez’s organic growth rate was shown to have accelerated from 0.8% in 2017 to 4.1% in 2019.

Mondelez has traded in a 52-week range of $41.19 to $59.96, and it has an $81.9 billion market cap and a consensus target price of $63.10.

Papa John’s

Papa John’s International Inc. (NASDAQ: PZZA) is a new top pick in pizza takeout and delivery. Its $110 target price implies 22% upside, and it also comes with a 1% dividend yield. The firm called out Papa John’s as having an underappreciated multiyear growth story for same-store sales, and it sees improved unit economics supporting a compelling unit development opportunity. Credit Suisse also argues that Papa John’s is the biggest beneficiary of pandemic-related consumer behavior changes, and that this accelerated the company’s turnaround plans by years while also meaningfully boosting the financial positions of its franchisees.

Now the firm believes that this story narrative is shifting from turnaround to growth. The firm also pointed out that refranchising and divestiture of its commissary business could unlock additional value for shareholders.

Papa John’s has a 52-week trading range of $28.55 to $102.25, a consensus target price of $106.21 and a $3.0 billion market cap.

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