It’s hard to believe that this is the last week in the first quarter of 2022. The stock market’s positive momentum in 2021 hasn’t found its way into the New Year yet this quarter. Year to date, the Dow, the S&P 500 and NASDAQ are all in the red. But never fear my friends, it still isn’t time to burry your head in the sand and wake up when all of the volatility is over. Do what the smart money does. Follow Goldman Sachs and its Conviction List for 2022 that is utilized by its institutional and wealth management clients.
One should be cautioned that with the possibility of such high rates of return comes volatility and risk. The safe route is the best route for many, but growth investors who are more aggressive have the opportunity to purchase some companies now that have awesome upside potential. Those investors with a risk profile that can accommodate the current environment are probably looking for Wall Street’s best ideas.
TESLA (TSLA)
I know what you’re thinking. The ship has already sailed on Tesla and there’s nothing left in the tank. Yes, that is true to some extent. Tesla has been a favorite among investors, and it’s not hard to see why. Shares of the electric car giant have returned a jaw-dropping 2,044% over the past five years. Remember that Tesla is volatile and has been off its year-end price by as much as 10%. Still, Goldman is quite bullish on the company. On Jan. 10, one of its analysts Mark Delaney named Tesla a top pick for 2022.
He reiterated a buy rating on the company and raised his price target to $1,200. In addition, the Wall Street Journal reported today that Tesla has requested shareholder approval for a stock split, though it didn’t specify when such a split would take place or what the ratio of shares would be. None the less, this is bullish for the stock. As such, Tesla shares are up nearly 8% to $1,088 a share in Monday trading. The company typically holds its shareholder meeting in the fall.
VALVOLINE (VVV)
If you have ever changed the oil in your vehicle, this should be a familiar name. Valvoline Inc. manufactures, markets and supplies, engine and automotive maintenance products and services. It operates through two segments, Retail Services and Global Products, which Goldman sees as a great way to split its businesses. According to Goldman analysts, “We see potential for meaningful value unlocking with the separation.
The retail services business has a long runway for growth and we expect its high single-digit same-store-sales growth and high single-digit unit growth momentum to sustain for the foreseeable future.” Investors currently receive a 1.63% dividend, and Goldman has set its target price at $56, some 80% upside if such target is hit.
AZEK (AZEK)
This is an off-the-radar idea for many, but it has possibly the largest upside potential of the stocks on the Goldman Conviction List. The AZEK Company Inc. engages in designing, manufacturing, and selling building products for residential, commercial, and industrial markets in the United States. It operates through two segments, Residential and Commercial. According to Goldman analysts, “Given the operating backdrop and greater visibility into fiscal 2021, along with our increased confidence in management’s ability to execute against its multi-year strategy, we believe AZEK presents one of the most compelling risk/reward profiles in our coverage universe.”
Hitting the Goldman Sachs price target of $50 would be a 100% gain. Recent analyst upgrades at JP Morgan, Stephens, and DA Davidson also bode well for the upside potential here.
BIOMARIN PHARMACEUTICALS (BMRN)
Like most of the stocks on the Goldman list, BioMarin is well off its 2021 year-end highs. This pharma develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. Roche recently has been mentioned as a company that could be looking at BioMarin as an acquisition candidate.
Roche is focused on oncology drugs and invests heavily in early-stage molecules. The Goldman Sachs price objective on BioMarin Pharmaceuticals stock is $168, roughly 112% returns from its current price.
DATADOG (DDOG)
This under the radar tech name is probably unfamiliar to most, but popped up on the Goldman list and apparently holds tremendous upside potential. Technically speaking, Datadog, provides monitoring and analytics platform for developers, information technology operations teams, and business users in the cloud in North America and internationally.
That definition could probably be found in most company profiles, so what makes Datadog so convincing? In the words of Goldman analysts, “Based on the strength of its expanding product portfolio that addresses critical aspects of customers’ cloud migration, coupled with a solidly profitable business model that generates rising free-cash-flow margins alongside hyper-growth, Datadog is poised to grow into a preeminent infrastructure software business.” Seventy percent gains can be expected if Datadog hits its price projection of $250.
