With the S&P 500 trading at near record highs, and the internals starting to look a little wobbly, it is important to be very careful in picking stocks now. Goldman Sachs market strategist David Kostin recently released a bullish note to investors in which he forecast a 4% rise through the end of the year and a 7% increase over the next 12 months. His target for the S&P 500 is 1,750 in six months and 1,825 in 12 months. He also expects earnings growth through 2014 to support a continued market rally.
In his new monthly chartbook, Kostin presented a list of 40 stocks with the most upside to the Goldman Sachs price targets. We have the top 10 with the greatest upside potential.
Marathon Petroleum Corp. (MPC) is the top stock to buy at Goldman Sachs for the biggest gain potential. The company recently crushed estimates, posting revenues of $25.7 billion, up 26.9% year-over-year. The Goldman Sachs price target is $120. The Thomson/First Call estimate is at $86.50. Investors are paid a 2.3% dividend. A move to the Goldman target would be a 63% gain.
Autodesk Inc. (ADSK) comes in as a strong number two for upside potential. The company also may be a solid way to play the recovery in Europe. Goldman Sachs has a $50 price target, and the consensus target is at $40.50. Hitting the target would be a 41% gain for stockholders.
Ventas Inc. (VTR) is a health care real estate investment trust (REIT). The firm engages in investment, management, financing and leasing of properties in the health care industry. It invests in the real estate markets of the United States and Canada and is a huge benefactor of the aging population. The Goldman price target for the stock is $91, while the consensus estimate stands at $72. Investors are paid a solid 4.1% dividend. REIT distributions may contain return of principal. A move to the target would be a $38% gain for investors.
Salesforce. com Inc. (CRM) has sent many a short seller to the woodshed. The stock is up 400% since 2009 and may see additional upside. The Goldman Sachs price target is at $60, and the consensus is placed at $50. A move to the target would be a 37% gain.
American Tower Corp. (AMT) has also been a momentum trader's dream stock. The company announced on Friday it would be buying 4,500 wireless sites in Brazil and Mexico from NII Holdings Inc. (NIHD) for $811 million. The Goldman Sachs price target sits at $95, and the consensus target is $91. Shareholders are paid a 1.5% dividend. A move to the target would be a 34% gain.
Simon Property Group Inc. (SPG) reported second-quarter funds from operations (FFO) per share of $2.11, beating the estimate by $0.04 per share. FFO per share jumped 11.6% over the prior year. The company also reported revenue of $1.24 billion, which remained in line with expectations. The Goldman Sachs price target for this elite name is $213, while the consensus target is posted at $186.50. Shareholders are paid a 2.9% dividend. A move to the target would be a 33% gain.
Halliburton Co. (HAL) is already up almost 30% this year, and firm oil pricing should keep the stock moving higher. With almost 90% of all onshore U.S. wells needing some degree of hydraulic fracturing, the company is in the sweet spot for oilfield services. The Goldman Sachs price target is at $60, and the consensus figure stands at $54. Investors are paid a 1.1% dividend. Hitting the Goldman target would be a 33% gain.
Devon Energy Corp. (DVN) is expected to earn $10.3 billion in this fiscal year. It reported second-quarter net earnings last week of $683 million, or $1.69 per diluted share. That is a 43% increase over second-quarter 2012 net earnings of $477 million, or $1.18 per diluted share. Goldman Sachs has a $73 price target, and the consensus number is at $70. Investors are paid a 1.6% dividend. Hitting the target would be a 33% gain.
Expedia Inc. (EXPE) is benefiting from a huge pickup in domestic and foreign travel. They recently missed earnings estimates and the stock was hammered as a result. The Goldman Sachs price target is $62, while the consensus target is $60. Investors receive a 1.2% dividend. The Goldman target represents a 31% gain.
Southwestern Energy Co. (SWN) makes the top 10 list of cheapest stocks to buy now. The company crushed earnings and revenue estimates, when second-quarter revenue rose 42% to $862 million from $606.1 million the prior year. Goldman Sachs has a $51 price objective, and the consensus number is at $44. Hitting the target is a 31.5% gain for stockholders.
Some of the Goldman Sachs picks are momentum stocks looking to go higher, and some have just started to become more visible in earnings growth. We continue to preach a degree of caution as the market is expensive and perhaps in need of a correction. A debt ceiling fight or bond purchasing being tapered might be just the fire to ignite a sell off.