The clock is ticking down on calendar year 2019 -- and what a year it's been!
Stocks forming the S&P 500 index of America's biggest companies have returned 23% profits year-to-date -- twice the index's long-term average. And while it might seem unlikely that such a feat could repeat, at least one analyst thinks a strong 2020 isn't entirely out of the question.
Goldman Sachs chief U.S. equity strategist David Kostin outlined his firm's take on the 2020 stock market, predicting that with help from a "durable profit cycle and continued economic expansion ... the current bull market in US equities will continue in 2020."
Mind you, not everyone is so optimistic. CNBC notes that Goldman Sachs' prediction of an S&P 500 hitting 3,400 by December 31, 2020 is "one of the most bullish outlooks for 2020 among the major investment banks tracked by CNBC." But as Kostin argues, so long as Congress remains "divided," with neither political party holding a commanding lead, governmental meddling in the market should be kept to a minimum, resulting in stronger-than-average profits for stocks in the year to come.
So which stocks in particular have the best chance to thrive in 2020? With help from the TipRanks Stock Screener tool, we've identified three separate equities rated highly by Goldman Sachs -- and enjoying strong support elsewhere on Wall Street as well. Let's get to know them, beginning with...
Dallas, Texas-based Wingstop is -- as you've probably guessed -- a chicken-wings joint. It's no mom-and-pop shop, though, but a chain boasting 1,250 owned and franchised restaurants.
On Monday, Goldman Sachs analyst Katherine Fogertey added Wingstop to the investment bank's "conviction list," citing "signs of sustained" same store sales momentum and improving "delivery economics." In the near term, she sees Wingstop producing impressive same store sales growth of 12.5% in Q4. Longer term, Fogertey predicts that this company could grow off its already large base of stores to build a network of 4,000 domestic restaurants, and 2,300 international restaurants, by 2035.
"A key tenet of our international growth thesis is based on Wingstop’s ability to continue to sign and execute master franchise agreements to accelerate unit growth. We believe Wingstop will continue to execute master franchise agreements in order to accelerate international unit development, and expect this will be a key topic of discussion at the January analyst day," the analyst concluded.
Such astounding growth deserves an astounding price target prediction, and Fogertey doesn't fail to deliver: By this time next year, she thinks Wingstop stock will top $140 a share -- 66% profit from Monday's close. (To watch Fogertey's track record, click here)
Wall Street as a whole is bullish on Wingstop stock, with six "buy" ratings and 5 "holds" added by analysts in just the last month. On average, analyst estimates predict 18% upside for Wingstop shares as they climb to $99.44 per share over the next 12 months -- but Goldman Sachs is even more optimistic than that. (See Wingstop’s price targets and analyst ratings on TipRanks)
Owens Corning (OC)
Our next nominee from Goldman Sachs needs even less introduction. Pink Panther fans and homeowners alike will recognize the name of one of America's best-known makers of pink insulation. Goldman Sachs analyst Susan Maklari initiated coverage on this one with a "buy" rating, and also with a place on the firm's "conviction list." (To watch Maklari's track record, click here)
"Greater than expected top-line and margin expansion in its insulation and roofing segments" are key to Maklari's enthusiasm for Owens Corning stock, as the analyst forecasts a recovery in new home construction "on the back of lower [interest] rates." The analyst expects demand for roofing materials to be especially brisk in 2020 as transportation costs decline and construction demand ticks back up, resulting in "favorable volume, pricing, and cost dynamics across 75% of [OC's] revenue base over the next 12-months, allowing for above average profitability. This should offset more modest results in composites (remaining 25% of revenues) on the back of slower global growth."
Maklari concluded, "We believe greater than expected earnings power will be reflected in OC’s valuation over the next 12 months."
And once again, Goldman is ahead of the curve on price targets. Six analysts have chimed in on Owens Corning in the past month, with four of them rating the stock "buy," and two only "hold." Whereas the average analyst on Wall Street has Owens Corning pegged for about an 11% price gain to $72.44 over the next 12 months, Maklari is predicting a price closer to $80 a share -- 23% above Monday's close. (See Owens stock-price forecasts and analyst ratings on TipRanks)
Mohawk Industries (MHK)
Perhaps a less familiar name -- but still one tied to the housing industry -- our final Goldman pick today is Calhoun, Georgia's Mohawk Industries, maker of carpet, tile, hardwood, and other flooring products for homes and businesses. Once again, Maklari is the analyst making the pick, and once again she thinks this stock is a "buy" (albeit, apparently not a "conviction" buy).
Mohawk, as investors may recall, has had a rough couple of years, with profits declining (year over year) more quarters than they gained. Last quarter in particular, sales were down 1% -- and earnings fell 31.5%. But in Maklari's view, the company is close to "turning a corner" now.
President Trump's tariffs imposed on ceramic tiles imported from China will "negate their value," permitting "US ceramic tile inventories [to] normalize" as retailers work down their "excess supplies." At the same time, Maklari is predicting growing profit margins in the company's "US luxury vinyl tile" business. Combined with "consistent results" internationally, the analyst forecasts that a halt to revenue declines this year will be followed by a return to growth in both sales and earnings in 2020 and 2021, giving rise to greater investor interest in the equity.
"Although we recognize Mohawk has faced various operating and demand challenges over the last two years, we believe it is closer to turning a corner. We look for the stock to re-rate higher as the results of these efforts come through," Maklari concluded.
The average analyst price target for Mohawk over the next year is only $158.58 (14% upside), with two analysts rating the stock "buy" in the past month -- and one voting "sell." Maklari, however -- one of Mohawk's fans -- thinks the stock could rise as high as $165 a share, delivering a 19% profit to new investors en route. (See Mohawk stock analysis on TipRanks)