Is the bull market about to take a long breather? Not according to Goldman Sachs. In fact, the firm believes the bull market has a long way to run yet; Chief global equity strategist Peter Oppenheimer recently noted that the market was moving from a “’Hope’ phase to a longer ‘Growth’ phase.”
The firm’s economists are expecting the economy to sprout higher by 6.8% in 2021 and believe that by the end of the year the unemployment rate could drop to 4.1%.
And there’s enough evidence to suggest the economy is on the mend. Although unemployment rates remain high, claims have dropped since early January and retail sales have bounced back strongly. The drop in Covid-19 cases and a growing vaccinated population are an additional boost. So is the massive federal stimulus.
“We’re extremely likely to get a very high growth rate,” Goldman’s chief economist Jan Hatzius added. “Whether it’s a boom or not, I do think it’s a V-shaped recovery.”
With this in mind, the firm’s analysts have pinpointed 3 stocks they think are primed to roar ahead. Using the TipRanks database, we can see what the rest of the Street makes of Goldman’s choices. As it happens, these names are all Buy-rated by the analyst consensus as well.
Patria Investments (PAX)
The first Goldman’s choice is Patria Investments. This Brazilian asset manager is one of the leading investment companies in Latin American, having raised more than $8.7 billion in investment capital since 2015. As of the end of 3Q20, the last for which data is available, the company had total assets under management of $12.7 billion, put into 16 active funds. The direct investment portfolio included more than 55 companies.
Last month, Patria made its debut in the US equity markets, listing on the NASDAQ as PAX after its January 22 IPO. The plan had been to raise $400 million in new capital; in the event, the company brought in almost $512 million. The 30.1 million shares put on the market were 3.4 million more than had been called for, and adding to the success, they sold at $17, over the $14 to $16 range expected. After the IPO, Patria was valued at $2.3 billion and that market cap has now reached $2.77 billion.
The company has caught the eye of Goldman analyst Tito Labarta, who wrote, “We think Patria is well positioned to benefit from the ongoing “equitization” trends in Brazil, given historically low interest rates as investors search for higher yields… We think Patria is well positioned to grow its AUM at a healthy pace of c.20% per year over the next three years… while distributable earnings (DE) can grow 42% per year, as the company realizes performance fees from closed-end funds over the next few years.”
In line with that upbeat outlook, Labarta rates the stock a Buy, and his $28 price target indicates his confidence in 35% upside growth for the next year. (To watch Labarta’s track record, click here)
Patria has attracted 5 reviews already in its short time as a publicly traded company, and they break down 3 to 2 in favor of Buy versus Hold. The shares are priced at $20.74 and their $26.60 average price target implies a 12-month upside of ~23%. (See PAX stock analysis on TipRanks)
Constellation Brands (STZ)
Some companies need an extensive introduction, some we are familiar with. Constellation Brands is in the latter category. The company is the largest beer importer in the US, measured by sales, and consistently among the top three when measured by market share. Constellation’s portfolio includes more than 100 brands of beer, wine, and spirits, and is best known as the US owner of Mexico’s Corona and Modelo beers.
In its last reported quarter, 3Q20, STZ showed solid yearly gains. Specifically, the company posted $2.44 billion at the top line, for a 22% year-over-year gain. Non-GAAP EPS was up, too, at $3.09 per share, beating consensus estimates of $2.39. It was the fourth quarter in a row that STZ beat the expectations.
The company has gotten into a small spot of trouble, however, around Corona (the beer, not the virus). A lawsuit was filed by Grupo Modelo, the Mexican branch of international beverage giant AB InBev against Constellation, alleging violation of an agreement over use of the Corona brand name. Constellation purchased the US rights to that name in 2013, when AB InBev acquired Grupo Modelo, maker of Corona beer. In 2020, STZ launched Corona Hard Seltzer, and ABI now alleges that STZ’s ownership of the name applies only to beer. Constellation has hit back with filings claiming that it owns all exclusive rights to the Corona brand in the US.
Bonnie Herzog, Goldman’s beverage industry expert, notes that Constellation has already won an arbitration session on the Corona issue (after all, Corona Hard Seltzer was launched in February 2020).
“While we take no view on the outcome of this litigation, we believe the selloff in STZ’s stock is overdone and has provided a nice entry point especially considering how small Corona Hard Seltzer is to STZ’s total portfolio today,” Herzog noted. “We continue to expect the stock to re-rate higher over the long term driven by faster & more profitable growth.”
Herzog continues to see STZ as a solid portfolio addition, and maintains her Buy rating and $275 price target. At current levels, this implies ~23% upside on the one-year time frame. (To watch Herzog’s track record, click here)
Wall Street generally likes STZ, as shown by the 10 Buy-side reviews compared to just 5 Holds. This gives the stock a Moderate Buy analyst consensus rating. Shares are priced at $223.93, and their $253.20 average price target suggests room for 13% growth. (See STZ stock analysis on TipRanks)
Kornit Digital (KRNT)
Kornit Digital inhabits an interesting niche in the tech and manufacturing worlds, producing high-speed, industrial-grade, inkjet printers, along with pigmented ink and chemical products. The company’s business customer base comes from the apparel, garment, and textile industries.
Textiles make up a huge segment of the world’s economy, finding use in a wide range of sectors and appearing pretty much everywhere we go – so Kornit has no lack of customers, and even the corona crisis could not derail its business for long. This was apparent from the company’s share performance and quarterly finances over the past year.
The share price has appreciated 180% in the last 12 months, while revenues, after a dip in Q1:20, have shown sequential gains in every quarter since and year-over-year gains in Q3 and Q4. The fourth quarter results included $72.3 million at the top line, a 45% year-over-year gain. The company beat the estimates on the bottom-line with Non-GAAP EPS of $0.24 coming in $0.02 above the Street’s forecast.
Goldman’s Rod Hall attributes Kornit’s strength to “broad-based demand outperformance as the company continues to see tailwinds from the shift to digital printing and e-commerce.”
The analyst goes on to note unexpected effects of the COVID pandemic on Kornit’s business: “While we had originally believed that current growth might be unsustainable as we exit COVID we are increasingly convinced that COVID has actually accelerated adoption of personalized fashion enabling technology. We also believe COVID might have driven companies to adopt this technology to reduce physical inventory.”
Everything that KRNT has going for it convinced Hall to upgrade the stock from Neutral to Buy. In addition to the call, the analyst boosted his price target from $83 to $135, suggesting 17% upside potential. (To watch Hall’s track record, click here)
Kornit holds a unanimous Strong Buy rating from the analyst consensus, having received 6 Buy reviews recently. This stock has appreciated strongly in recent weeks, pushing the share price almost up to the average price target of $124. This leaves room for ~8% upside from the current trading price of $115. (See KRNT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.