Investing

Jefferies Makes Massive 2023 Changes to 'Strong Buy' Franchise List of Top Stock Picks

Lee Jackson

Published: December 22, 2022 7:23 am

All the companies that we follow here at 24/7 Wall St. keep a curated list for their institutional and high net worth retail clients of their highest conviction stock picks. These are generally the companies the analysts not only like on a longer term basis, but stocks that usually have solid upside to the assigned target price. Since we are nearing the end of the year, many firms on Wall Street have tweaked their lists of top stocks to buy to account for continued economic changes in 2023. One company we follow has added some outstanding stocks that could have outsized upside.
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In a new research report, the analysts at Jefferies make a huge move in reworking the firm’s Franchise Picks list. Eight new companies are added to the list, while six are removed. We have covered the Franchise Picks list for years, and this is one of the larger portfolio changes we have ever seen. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Here are the eight new additions to the Jefferies Franchise Picks list.

Amgen

This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.

The company’s products include the following:

• Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
• Neulasta reduces the chance of infection due a low white blood cell count in patients with cancer
• Prolia to treat postmenopausal women with osteoporosis
• Xgeva for skeletal-related events prevention
• Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
• Aranesp to treat a lower-than-normal number of red blood cells and anemia
• Kyprolis to treat patients with relapsed or refractory multiple myeloma
• Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization

Shareholders receive a 3.22% dividend. Jefferies has a $325 target price on Amgen stock. The consensus target is much lower at $266.66, near Wednesday’s closing share price of $266.26.

Baker Hughes

This stock makes sense for investors looking for energy exposure via services. Baker Hughes Co. (NYSE: BKR) provides a portfolio of technologies and services to the energy and industrial value chain worldwide.

The company offers exploration, drilling, wireline, evaluation, completion, production and intervention services, as well as drilling and completions fluids, wireline services, downhole completion tools and systems, wellbore intervention tools and services, pressure pumping systems, oilfield and industrial chemicals, and artificial lift technologies for oil and natural gas and oilfield service companies.
Baker Hughes also provides subsea and surface wellheads, pressure control and production systems and services, flexible pipe systems for offshore and onshore applications, and life-of-field solutions, including well intervention and decommissioning solutions, as well as services related to onshore and offshore drilling and production operations. In addition, the company offers equipment and related services for mechanical-drive, compression and power-generation applications across the oil and gas industry. Its product portfolio includes drivers, compressors and turnkey solutions, as well as pumps, valves and compressed natural gas and small-scale liquefied natural gas solutions.
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Further, the company provides sensor-based process measurements, machine health and condition monitoring, asset strategy and management, control systems, as well as non-destructive testing and inspection and pipeline integrity solutions. Baker Hughes serves upstream, midstream, downstream, onshore, offshore and industrial customers.

Investors receive a 2.69% dividend. Jefferies has set a $36 price target, while the consensus target for Baker Hughes stock is $33.79. Wednesday’s closing print was $29.35.

Dexcom

This stock has been on a roll and looks to have more upside potential. Dexcom Inc. (NASDAQ: DXCM) is a medical device company focused on the design, development and commercialization of continuous glucose monitoring (CGM) systems in the United States and internationally.

The company provides its systems for use by people with diabetes, as well as for use by health care providers. Its products include Dexcom G6, an integrated CGM system for diabetes management; Dexcom Real-Time API, which enables invited third-party developers to integrate real-time CGM data into their digital health applications and devices; Dexcom ONE, which is designed to replace finger stick blood glucose testing for diabetes treatment decisions; and Dexcom Share, a remote monitoring system.

The Dexcom products candidature includes Dexcom G7, a next-generation G7 CGM system. Dexcom has a collaboration and license agreement with Verily Life Sciences and Verily Ireland to develop blood-based or interstitial glucose monitoring products. The company markets its products directly to endocrinologists, physicians and diabetes educators.

The Jefferies price target is $135, and the consensus target is $129.29. Dexcom stock closed on Wednesday at $114.76.

Estee Lauder

With the holidays in full swing, shares of this long-time fragrance producer have some outstanding upside potential. Estee Lauder Companies Inc. (NYSE: EL) manufactures, markets and sells skincare, makeup, fragrance and hair care products worldwide.

The company offers a range of skincare products, including moisturizers, serums, cleansers, toners, body care, exfoliators, acne care and oil correctors, facial masks, cleansing devices, and sun care products. Its makeup products include lipsticks, lip glosses, mascaras, foundations, eyeshadows, nail polishes and powders, as well as compacts, brushes and other makeup tools.

It also provides fragrance products in various forms, comprising eau de parfum sprays and colognes, as well as lotions, powders, creams, candles and soaps. Its hair care products include shampoos, conditioners, styling products, treatment, finishing sprays and hair color products, and it sells ancillary products and services.
Estee Lauder offers its products under the Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, Kilian Paris, Too Faced, Dr. Jart+, DECIEM and The Ordinary brands. The company sells its products through department stores, specialty-multi retailers, upscale perfumeries and pharmacies, and salons and spas, as well as its own and authorized retailer websites, third-party online malls, stores in airports and duty-free shops.
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Estee Lauder stock comes with a 1.11% dividend. The $270 Jefferies price target is greater than the $251.20 consensus target and the $243.87 close on Wednesday.

Okta

While probably not a household name, this company could be a target of private equity. Okta Inc. (NASDAQ: OKTA) provides identity solutions for enterprises, small and medium-sized businesses, universities, nonprofits and government agencies in the United States and internationally.

The company offers Okta Identity Cloud, a platform that offers a suite of products and services, such as Universal Directory, a cloud-based system of record to store and secure user, application and device profiles for an organization; Single Sign-On that enables users to access applications in the cloud or on-premise from various devices; Adaptive Multi-Factor Authentication provides a layer of security for cloud, mobile, Web applications and data; Lifecycle Management that enables IT organizations or developers to manage a user’s identity throughout its lifecycle; API Access Management that enables organizations to secure APIs; Access Gateway that enables organizations to extend the Okta Identity Cloud from the cloud to their existing on-premise applications; and Advanced Server Access to secure cloud infrastructure.

Okta stock has an $80 price target and Jefferies. The consensus target is $78.85, and shares closed at $67.94 on Wednesday.

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Progressive

One business that never seems to struggle is insurance, and this is a leader in the industry. Progressive Corp. (NYSE: PGR) provides personal and commercial auto, personal residential and commercial property, general liability, and other specialty property-casualty insurance products and related services in the United States. It operates in three segments.

Its Personal Lines segment writes insurance for personal autos and recreational vehicles. This segment’s products include personal auto insurance and special lines products, including insurance for motorcycles, ATVs, RVs, watercrafts, snowmobiles and related products.

The Commercial Lines segment provides auto-related primary liability and physical damage insurance, and business-related general liability and property insurance for autos, vans, pickup trucks and dump trucks used by small businesses; tractors, trailers and straight trucks primarily used by regional general freight and expeditor-type businesses and long-haul operators; dump trucks, log trucks and garbage trucks used by dirt, sand and gravel, logging and coal-type businesses; and tow trucks and wreckers used in towing services and gas/service station businesses; as well as non-fleet and airport taxis and black-car services.

The Property segment writes residential property insurance for homes, condos, manufactured homes, and renters, as well as offers personal umbrella insurance, and primary and excess flood insurance. The company also offers policy issuance and claims adjusting services, and it acts as an agent to place business owner’s policies, general and professional liability, and workers’ compensation insurance. In addition, it provides reinsurance services. The company sells its products through independent insurance agencies, as well as directly on the internet through mobile devices and over the phone.

Shareholders receive a 0.31% dividend. The Jefferies price target is $146. The $127.57 consensus target is lower than the $129.12 close for Progressive stock on Wednesday.

While probably the least known company of the new additions to the Franchise List, this stock offers big upside potential. R1 RCM Inc. (NASDAQ: RCM) provides technology-driven solutions that transform the patient experience and financial performance of hospitals, health systems and medical groups. The company offers end-to-end revenue cycle management (RCM) services, which address the spectrum of revenue cycle challenges faced by health care providers.
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R1 RCM also provides modular services, including physician advisory services, which assist health care organizations in complying with payer requirements regarding whether to classify a hospital visit as an in-patient or an out-patient observation case for billing purposes; practice management services that offer administrative and operational support for patient care and outsource non-core functions; revenue integrity solutions, including charge capture, charge description master maintenance and pricing services; coding management services, such as business intelligence and analysis, human capital management, accountability framework and quality management programs; patient experience; and business office services. In addition, the company offers software-as-a-service based scheduling and patient access solutions.

The Jefferies target price of $13 is lower than the $14.57 consensus target. Wednesday’s closing price was $11.05 a share.

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SVB Financial

This boutique financial services firm may be off many investors’ radar screens. SVB Financial Group (NASDAQ: SIVB) is a diversified financial services company offering various banking and financial products and services. It operates through the following four segments.

The Global Commercial Bank segment provides commercial banking products and services, including credit, treasury management, foreign exchange, trade finance and other financial products and services. This segment also offers traditional term and equipment loans, asset-based loans, revolving lines of credit, warehouse facilities, recurring revenue and acquisition finance facilities, mezzanine lending, corporate working capital facilities and credit card programs; treasury management products and services; business and analysis checking, money market, multi-currency, in-country bank and sweep accounts; receivables services, which include merchant services, remote capture, lockbox and fraud control services; wire transfer and automated clearing house payment services; and business bill pay, credit and debit cards, account analysis and disbursement services. In addition, it offers foreign exchange and trade finance products and services; letters of credit; and investment services and solutions.

The SVB Private Bank segment offers mortgages, home equity lines of credit, restricted and private stock loans, capital call lines of credit and other secured and unsecured lending products; planning-based financial strategies, wealth management, family office, financial planning, tax planning and trust services; and real estate secured loans.

The SVB Capital segment provides venture capital investment services, while the SVB Securities segment provides investment banking services, as well as products and services, including capital raising, merger and acquisition advisory, equity research, and sales and trading.

The $288 Jefferies price objective compares with a consensus target of $293.33 for SVB Financial stock, which closed at $217.35 on Wednesday.

After a horrific 2022, most of the eight new stocks ushered into the Franchise Picks in a massive portfolio change (the size of which we have rarely seen) have been marked down to levels that offer growth investors very solid entry points and outstanding upside potential. While the first half of 2023 could still prove to be bumpy, things should smooth out by the summer, providing a nice tailwind for the second half of the year for these top ideas from Jefferies.