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Credit Suisse says buy these 14 stocks that represent its analysts' highest-conviction picks for Juneand that Wall Street is severely underrating

Published by Business Insider on Sun, 06 Jun 2021

<p><img src="https://static6.businessinsider.com/image/60ba7541e459cb0018a2c4ba-2222/GettyImages-1084687838.jpg" border="0" alt="Trader on the floor of the New York Stock Exchange" data-mce-source="Spencer Platt/Getty Images"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Stocks have gone through a reshuffling in the last few weeks, with a lot of <a href="https://markets.businessinsider.com/news/stocks/cathie-wood-ark-innovation-etf-lowest-year-tech-stocks-2021-5-1030410825">familiar high-flying names struggling</a>. <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-tech-fall-continue-not-interest-rate-driven-2021-5-1030478816">It might not be over yet</a>.</p><p>That could make this a good time to revisit some overlooked and underappreciated ideas. Credit Suisse has a guide to those ideas in the form of its monthly top picks, which includes a group of stocks that the firm's analysts are very confident in and that they believe their Wall Street peers are overlooking.</p><p>"We assess the conviction level of CS analysts for their respective top Outperform picks by comparing their EPS estimates (FY2) and their target price estimates (12-month rolling) to consensus estimates," the firm says.</p><p>Credit Suisse also takes into account the companies' expected cash flow returns on invested capital, and targets companies where the rest of the market consensus is notably bearish, with more "Sell" ratings than "Buy" ratings.</p><p>That cocktail of low expectations and high upside can translate into big gains.</p><p>The following stocks are ranked from lowest to highest based on how high they would have to rise to reach Credit Suisse's price targets, as a way of evaluating how much upside the analysts think the stocks have. Those upside figures were calculated based on Thursday's closing prices.</p><h3>14. Devon Energy</h3><img src="https://static1.businessinsider.com/image/60ba37cae459cb0018a2c30e-400-300/14-devon-energy.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/dvn-stock">DVN</a></p><p><strong>Sector</strong>: Energy</p><p><strong>Market cap</strong>: $20.8 billion</p><p><strong>Thesis</strong>: "We view DVN as a consolidator and expect it will continue to pursue acquisition opportunities as a way to increase scale, lower its breakeven WTI price and enhance its ability to return excess cash to shareholders." <em>&mdash; William Janela</em></p><p><strong>Target price</strong>: $32</p><p><strong>Upside to target</strong>: 2.7%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>13. Viper Energy Partners</h3><img src="https://static2.businessinsider.com/image/60ba7fcd93c6fa00195e54bd-400-300/13-viper-energy-partners.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/vnom-stock">VNOM</a></p><p><strong>Sector</strong>: Energy</p><p><strong>Market cap</strong>: $1.2 billion</p><p><strong>Thesis</strong>: "VNOM is our top pick amongst the US Oil &amp; Gas Royalty companies given its unique FANG-sponsorship which helps mitigate development timing risk. ... The company also boasts best-in-class cash margins which are also relatively insulated vs E&amp;Ps given the absence of operational expense." <em>&mdash; Chris Baker</em></p><p><strong>Target price</strong>: $20</p><p><strong>Upside to target</strong>: 7.1%</p><p><em>Source: Credit Suisse</em></p><p>&nbsp;</p></p><br/><br/><h3>12. Aptiv</h3><img src="https://static4.businessinsider.com/image/60ba39e2e459cb0018a2c321-400-300/12-aptiv.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/aptv-stock">APTV</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $41.9 billion</p><p><strong>Thesis</strong>: "Even factoring in turbulent end markets, we expect that APTV's strong growth-overmarket, favorable exposure to secular industry trends, and strategic actions focused on FCF will drive long-term value creation." <em>&mdash; Dan Levy</em></p><p><strong>Target price</strong>: $170</p><p><strong>Upside to target</strong>: 9.0%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>11. Advance Auto Parts</h3><img src="https://static6.businessinsider.com/image/60ba37a293c6fa00195e5265-400-300/11-advance-auto-parts.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/aap-stock">AAP</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $12.5 billion</p><p><strong>Thesis</strong>: "A leading auto aftermarket parts retailer, serving a mix of professional and retail customers, offers exposure to a relatively defensive category ..., plus many internal initiatives aimed to close the significant margin gap to peers. AAP and the industry is in a better position than five years ago. Progress has been made, even if slower than we expected, and the company is now further along on supply chain, one of the key constraints in the past, in addition to other sales and margin initiatives" <em>&mdash; Lavesh Himnani</em></p><p><strong>Target price</strong>: $215</p><p><strong>Upside to target</strong>: 12.5%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>10. IBM</h3><img src="https://static6.businessinsider.com/image/60ba38b593c6fa00195e5271-400-300/10-ibm.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/ibm-stock">IBM</a></p><p><strong>Sector</strong>: Information technology</p><p><strong>Market cap</strong>: $130.2 billion</p><p><strong>Thesis</strong>: "We've continued to see green shoots around our hybrid cloud thesis that centers on RHT, CloudPaks, and GBS, and expect momentum to continue into 2H and ramp further in 2022. We also see the planned 4Q spin-off of the MIS business as a catalyst, and think it eases the path to sustained revenue growth." <em>&mdash; Matthew Cabral</em></p><p><strong>Target price</strong>: $165</p><p><strong>Upside to target</strong>: 13.3%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>9. Teck Resources (Class B)</h3><img src="https://static5.businessinsider.com/image/60ba830ce459cb0018a2c503-400-300/9-teck-resources-class-b.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://www.marketwatch.com/investing/stock/teck.b'countrycode=ca&amp;mod=over_search">TECK.B</a></p><p><strong>Sector</strong>: Materials</p><p><strong>Market cap</strong>: $13.1 billion</p><p><strong>Thesis</strong>: "Teck has a compelling, capital-efficient copper growth story that will pivot the earnings mix away from lower multiple coal. ... Teck has the most copper growth pipeline relative to any other large diversified mining company in the world."&nbsp;<em>&mdash; Curt Woodworth</em></p><p><strong>Target price</strong>: C34</p><p><strong>Upside to target</strong>: 17.7%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>8. Edwards Lifesciences</h3><img src="https://static4.businessinsider.com/image/60ba3899e459cb0018a2c316-400-300/8-edwards-lifesciences.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/ew-stock">EW</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Market cap</strong>: $58.0 billion</p><p><strong>Thesis</strong>: "The size of the long-term [transcatheter aortic valve replacement] market and the strength of EW's leadership position is not fully reflected in the stock at current levels." <em>&mdash; Matt Miksic</em></p><p><strong>Target price</strong>: $112</p><p><strong>Upside to target</strong>: 18.6%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>7. UPS</h3><img src="https://static3.businessinsider.com/image/60ba37f293c6fa00195e5267-400-300/7-ups.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/ups-stock">UPS</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Market cap</strong>: $184.4 billion</p><p><strong>Thesis</strong>: "(1) Domestic pricing power has tangibly shifted toward the carriers; (2) capex is likely set to begin its descent from a multi-year high ... and (3) the company is now being led by a change agent with a proven track record of executing on cost performance, efficiency gains, capital discipline, and improved returns." &mdash;&nbsp;<em>Allison Landry</em></p><p><strong>Target price</strong>: $261</p><p><strong>Upside to target</strong>: 23.1%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>6. PennyMac Financial Services</h3><img src="https://static3.businessinsider.com/image/60ba390ee459cb0018a2c319-400-300/6-pennymac-financial-services.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pfsi-stock">PFSI</a></p><p><strong>Sector</strong>: Financials</p><p><strong>Market cap</strong>: $4.0 billion</p><p><strong>Thesis</strong>: "There is significant upside to book value from current levels as strong origination volumes should persist through 2021 as the rate environment continues to drive refinance activity, while the purchase market remains strong from structural tailwinds of limited supply of new housing and increasing household formation." <em>&mdash; Doug Harter</em></p><p><strong>Target price</strong>: $74</p><p><strong>Upside to target</strong>: 24.1%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>5. Amazon</h3><img src="https://static2.businessinsider.com/image/60ba378b93c6fa00195e5264-400-300/5-amazon.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/amzn-stock">AMZN</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $1.63 trillion</p><p><strong>Thesis</strong>: "Amazon is undoubtedly responding to demand signals that is propelling a step-up in investment and not only is this going toward fulfillment centers, but it is also going to the middle and last mile delivery capacity as it looks to return to its progress of driving greater availability of 1-day Prime delivery."&nbsp;<em>&mdash; Stephen Ju</em></p><p><strong>Target price</strong>: $4,000</p><p><strong>Upside to target</strong>: 25.5%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>4. Papa John's International</h3><img src="https://static3.businessinsider.com/image/60ba39fe93c6fa00195e5279-400-300/4-papa-johns-international.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pzza-stock">PZZA</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $3.1 billion</p><p><strong>Thesis</strong>: "PZZA is arguably the biggest beneficiary of pandemic-related consumer behavior changes, accelerating turnaround plans by years and meaningfully improving the financial positions of its franchisees. We believe the narrative is shifting from turnaround to growth." &mdash;&nbsp;<em>Lauren Silberman</em></p><p><strong>Target price</strong>: $125</p><p><strong>Upside to target</strong>: 32.2%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>3. SeaWorld Entertainment</h3><img src="https://static5.businessinsider.com/image/60ba3a2793c6fa00195e527b-400-300/3-seaworld-entertainment.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/seas-stock">SEAS</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $.4 billion</p><p><strong>Thesis</strong>: "SEAS is one of the most compelling names in our coverage. ... We think pent-up demand and the incremental operating days from turning several parks into year round operations will allow attendance to reach pre-COVID levels fairly easily." <em>&mdash; Ben Chaiken</em></p><p><strong>Target price</strong>: $73</p><p><strong>Upside to target</strong>: 32.7%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>2. Motorola Solutions</h3><img src="https://static3.businessinsider.com/image/60ba393593c6fa00195e5275-400-300/2-motorola-solutions.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/msi-stock">MSI</a></p><p><strong>Sector</strong>: Information technology</p><p><strong>Market cap</strong>: $35.2 billion</p><p><strong>Thesis</strong>: "We find strong conviction in MSI's business model, pipeline, adjacent synergistic market opportunities. ... We see a scenario where MSI is increasingly becoming a one-stop shop for major first responder and government customers." <em>&mdash; Sami Badri&nbsp;</em></p><p><strong>Target price</strong>: $301</p><p><strong>Upside to target</strong>: 43.4%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/><h3>1. Peloton Interactive</h3><img src="https://static1.businessinsider.com/image/60ba395ee459cb0018a2c31b-400-300/1-peloton-interactive.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pton-stock">PTON</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $32.4 billion</p><p><strong>Thesis</strong>: "A large and growing TAM, strong innovation pipeline, and geographic expansion support sustainable growth ... Near-term delay of treadmill sales due to recall are unlikely to impact future outlook."&nbsp;<em>&mdash; Kaumil Gajrawala</em></p><p><strong>Target price</strong>: $152</p><p><strong>Upside to target</strong>: 47.4%</p><p><em>Source: Credit Suisse</em></p></p><br/><br/>
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