Goldman Sachs says buy these 19 beaten-down stocks on its 'holiday shopping list' that are poised to break out in the 1st quarter of 2021

  • The worst-performing stocks of any given year often rebound at the start of the following year as investors hunt for bargains and bet on a recovery.
  • Alex Meintel says that trade has had shaky results lately, but should work in 2021 with the market and economy in recovery mode.
  • He identifies stocks with extra upside or the potential for stronger earnings that will improve investors' odds of success.
  • Visit Business Insider's homepage for more stories.

There's something of a rule that the worst-performing stocks of one year will probably rally at the start of the new year, in sort of a "what goes down must come up."

Alex Meintel of Goldman Sachs acknowledges that the rule hasn't always held over the last few years, but he says there are good reasons to think the hardest-hit companies of 2020 will spring back in the first three months of 2021. One is simple: It's been a long time since the market's worst stocks looked this bad compared to the rest.

"With 2020 laggards exhibiting the worst YTD relative performance since 2007, and reversals already starting under the surface, we expect there to be a large degree of investor focus on where there are fundamental reasons to support this shift," he wrote in a note to clients.

Buying 2019's worst performers didn't work in 2020 as markets were swamped in the first quarter when the pandemic hit. But with the global economy re-emerging from a recession, Meintel says he is using a series of methods to find companies that have a much better shot at a rebound at the start of 2021.

He says the most promising recovery candidates in the first quarter reflect at least one of six themes. The first group consists of "value" picks that are trading at attractive levels and could experience a sustainable recovery as analysts raise their estimates.

He calls the second group "coiled springs" because their margins could bounce back in 2021, improving sentiment. In other cases, dubbed "growth" names, Goldman Sachs' analysts are more optimistic than most on Wall Street, as they think the companies' earnings and revenue will stage a stronger recovery than others do.

Other laggards on Meintel's list are "out of consensus buys" where Goldman Sachs is very positive on the companies and assigns a "Buy" rating while the majority of analysts have "Neutral" or "Sell" ratings, or "above consensus" themes where the firm expects the companies' 2021 performance to be much better than the consensus.

The final group of potential recovery stocks rates in the top 20% of Goldman's "quality" measurements.

The 19 stocks that follow are Meintel's top examples of those themes, and the specific reason he's optimistic about their recovery is named on each slide. The stocks are ranked from lowest to highest based on upside to Goldman Sachs' price targets as of December 1.

19. SL Green

Ticker: SLG

Sector: Real estate

Market cap: $4.2 billion

Why it will bounce back: Differentiated Buy

Upside to target: 14%

Source: Goldman Sachs

18. Boeing

Ticker: BA

Sector: Industrials

Market cap: $120.5 billion

Why it will bounce back: Above consensus

Upside to target: 16%

Source: Goldman Sachs

17. CommScope

Ticker: COMM

Sector: Information technology

Market cap: $2.5 billion

Why it will bounce back: Above consensus

Upside to target: 18%

Source: Goldman Sachs

16. Allstate

Ticker: ALL

Sector: Financials

Market cap: $31.8 billion

Why it will bounce back: Above consensus

Upside to target: 18%

Source: Goldman Sachs

15. Becton Dickinson

Ticker: BDX

Sector: Healthcare

Market cap: $69.3 billion

Why it will bounce back: Coiled spring

Upside to target: 19%

Source: Goldman Sachs

14. Oshkosh

Ticker: OSK

Sector: Industrials

Market cap: $5.6 billion

Why it will bounce back: Above consensus

Upside to target: 19%

Source: Goldman Sachs

13. Allison Transmission Holdings

Ticker: ALSN

Sector: Industrials

Market cap: $4.6 billion

Why it will bounce back: Value with upside

Upside to target: 21%

Source: Goldman Sachs

12. Leggett & Platt

Ticker: LEG

Sector: Consumer discretionary

Market cap: $5.7 billion

Why it will bounce back: Coiled spring

Upside to target: 21%

Source: Goldman Sachs

11. Brixmor Property Group

Ticker: BRX

Sector: Real estate

Market cap: $4.6 billion

Why it will bounce back: Value with upside

Upside to target: 24%

Source: Goldman Sachs

10. CACI International

Ticker: CACI

Sector: Information technology

Market cap: $6.1 billion

Why it will bounce back: Growth

Upside to target: 26%

Source: Goldman Sachs

9. Magnolia Oil & Gas

Ticker: MGY

Sector: Energy

Market cap: $1.6 billion

Why it will bounce back: Growth

Upside to target: 28%

Source: Goldman Sachs

8. Simon Property Group

Ticker: SPG

Sector: Real estate

Market cap: $28.9 billion

Why it will bounce back: High quality

Upside to target: 28%

Source: Goldman Sachs

7. Energy Transfer

Ticker: ET

Sector: Energy

Market cap: $17.1 billion

Why it will bounce back: Value with upside

Upside to target: 29%

Source: Goldman Sachs

6. Accel Entertainment

Ticker: ACEL

Sector: Consumer discretionary

Market cap: $968 million

Why it will bounce back: Coiled spring

Upside to target: 29%

Source: Goldman Sachs

5. AssetMark Financial Holdings

Ticker: AMK

Sector: Financials

Market cap: $1.7 billion

Why it will bounce back: Growth

Upside to target: 32%

Source: Goldman Sachs

4. United Airlines

Ticker: UAL

Sector: Industrials

Market cap: $13.7 billion

Why it will bounce back: Differentiated Buy

Upside to target: 33%

Source: Goldman Sachs

3. Halliburton

Ticker: HAL

Sector: Energy

Market cap: $15.6 billion

Why it will bounce back: Differentiated Buy

Upside to target: 36%

Source: Goldman Sachs

2. Schneider National

Ticker: SNDR

Sector: Industrials

Market cap: $3.7 billion

Why it will bounce back: High quality

Upside to target: 44%

Source: Goldman Sachs

1. Incyte

Ticker: INCY

Sector: Healthcare

Market cap: $18.0 billion

Why it will bounce back: High quality

Upside to target: 57%

Source: Goldman Sachs

Get the latest Goldman Sachs stock price here.

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