A recent report by investment bank Goldman Sachs lays out the risks and opportunities in the near-term markets heading into 2020. The bank’s investment strategists said that, after three rate cuts this year, they no longer see bonds as the go-to for risk-averse investors. Instead, foreseeing modest growth, they believe stocks are the better way to go for now.
“We expect moderately better economic and earnings growth, and therefore decent risky asset returns,” the Goldman report stated. Going into detail, the reported noted that market prices are already taking account of the US-China tariff disputes and the ongoing Brexit drama. They advise a cautious investment stance, and move toward high-quality assets.
So, with that in the background, we’ve pulled three "strong buy" stocks from the TipRanks' Stock Screener. All three have recent recommendations from some of Goldman’s top stock analysts. But more than that, all three are trending upward and show distinct upside potential.
Brinks Company (BCO)
You’re probably familiar with Brinks; the private security company’s trucks are visible in over 100 countries around the world. Brinks is best known for its armed and armored guard and courier service, provided to governments, banks, jewelers, and retailers. The company provides ATM services, too, including machine installation, replenishment, and maintenance, and money processing services, such as counting, sorting, and storage. Brinks also offers payment processing and physical safes for retailers. Brinks has positioned itself as one-stop-shop for the commercial security industry.
Security is an essential service for any business dealing with cash and valuables, and Brinks' quarterly results reflected the company’s success as a service provider. Revenues came in at $924 million, 8.5% higher than the year-ago quarter, while EPS beat the forecast by 3% and showed a quarterly print of $1.05. The strong quarter, the seventh in a row that Brinks beat the estimates, was reflected in the share price: Brinks is up an impressive 37% year-to-date.
Brinks's strong performance and recent share gains prompted Goldman’s George Tong, a 5-star analyst, to initiate coverage of the stock with a Buy rating and a $108 price target. Tong wrote, “Brinks has a healthy mid-to-high single digit annual organic revenue growth outlook driven by improving service quality, expanding services and the penetration of new markets. We view Brink’s strategy to develop end-to-end cash supply chain managed services targeting retail clients as capable of driving accelerating revenue growth and upward estimate revisions…” Tong’s price target suggests a 17% upside for this stock. (To watch Tong's track record, click here)
Overall, Brink’s shares maintain a unanimous Strong Buy analyst consensus, based on 4 recent Buy ratings. Shares are selling for $92.5, and the $105 price target indicates room for a 13% upside. (See Brinks stock analysis on TipRanks)
Lowe’s Companies (LOW)
The second-largest home improvement superstore in the US, Lowe’s has faced a mix of hard times and optimism lately. The stock has been highly volatile in the past year as the company has worked to execute a turnaround strategy and improve profits and earnings. Volatility aside, LOW shares are up 26% since January, just outperforming the S&P 500’s 24% gain.
Part of Lowe’s success is the ground-up improvement strategy executed by CEO Marvin Ellison. Ellison took over in May of 2018 and took a hands-on approach to improving the retail basics: stocking, merchandising, and customer service. Ellison has also been ruthless in cost-cutting measures, shuttering underperforming stores and laying off several thousand workers. His efforts paid off, however, and in 1H19 Lowe’s outperformed its larger competitor, Home Depot. In a statement to all Lowe’s employees last month, Ellison affirmed the company’s commitment to “…tremendous change and growth to position us toward becoming the leading home improvement retailer.”
Despite the hits to company morale, management’s efforts have paid off on the fiscal bottom line. Last year, Lowe’s recorded annual revenues of $68.6 billion, up 5.5%, while net profits, at $3.4 billion, were up 1.3%. In the most recent earnings report, Q3 2019, LOW’s EPS came in at $1.41, well above the $1.35 forecast. While quarterly revenues just missed projections for the quarter, the company did increase its full-year EPS guidance to an upper limit of $5.70.
5-star analyst Kate McShane, weighing in from Goldman Sachs, said, “3Q results represented a positive step in rebuilding investor conﬁdence around LOW’s execution capabilities and transformation strategy. The company demonstrated another quarter of sequential gross margin improvement, raised full-year EPS, and remains conﬁdent that strategic initiatives can help drive a comp acceleration in 4Q.” She reiterated her Buy rating and set a price target of $135, indicating confidence in a 15% upside. (To watch McShane's track record, click here)
All in all, Wall Street loves the retail giant's stock, considering most voices are betting on LOW. Based on 19 analysts polled by TipRanks in the last 3 months, 16 rate LOW a "buy," while 3 say "hold." The 12-month average price target stands at $136.81, marking a 17% upside from where the stock is currently trading. (See LOW stock analysis on TipRanks)
Tradeweb Markets (TW)
A public company only since this past April, Tradeweb has recently gotten a lot of love from Wall Street. Tradeweb is an online marketplace for over-the-counter financial products, including municipal bonds, corporate bonds, and certificates of deposit. The company functions as an interdealer broker, connecting commercial and investment banks and trading firms with buyers and sellers in the financial markets. Essentially, Tradeweb is an digital platform for online bond and derivative trading.
Tradeweb raised over $1.1 billion in it’s April IPO, making it the second largest IPO in the US this year. In an impressive performance, TW shares closed at $35 in the first day of trading, and despite high volatility, have gained 27% since. In its Q3 report, Tradeweb showed net income of $48.6 million and a diluted EPS of 20 cents. Gross revenues hit a quarterly record of $201 million, up 21% from Q2. The most important number, however, is likely the ADV, or average daily volume, for the quarter. In Q3, Tradeweb set a new quarterly record for ADV, hitting $815 billion – an increase of 53% year-over-year.
After the company’s strong gains in the third quarter, Goldman analyst Alexander Blostein upgraded his stance on this stock, raising it from "neutral" to "buy." He wrote, “We see the stock’s solid organic revenue growth and expanding operating margins collectively driving ~15% EPS growth in 2020/2021 - a critical point of differentiation versus most other Exchanges, where top-line trends are decelerating, margin expansion is becoming increasingly harder to achieve (absent of a macro-driven spike in volatility), and valuations remain expensive. We think TW is likely to sustain its growth momentum driven by: (1) Continued market share gains, particularly in Interest Rate Derivatives and Credit. (2) Favorable revenue capture trends. (3) Significant runway to EBITDA margin expansion.” Blostein’s $53 price target implies room for an 17% upside to TW. (To watch Blostein's track record, click here)
With a background like that, it’s no wonder that Tradeweb has attracted bullish reviews from the analysts. TW's analyst consensus rating is a Strong Buy, with 4 analysts giving it the thumbs up and only one analyst suggesting to stay sidelined. Shares sell for $45.27, and the average price target is $49.60; this indicates a potential upside of nearly 10%. (See Tradeweb stock analysis on TipRanks)