Goldman Sachs analysts shook up its so-called conviction buy list on Monday, adding Dow component Travelers Cos., apparel maker Ralph Lauren and hedge fund Och-Ziff Capital Management as their best investment ideas.
To make room for Goldman's three new picks, retailer TJX Cos., insurance company XL Group and asset manager BlackRock were bumped from the list of prime stocks.
Turning first to retail, Goldman analyst Adrianne Shapira upgraded Ralph Lauren to "buy" from "neutral," increasing the bank's 12-month price target to $190. Shapira says Ralph Lauren has many advantages, including a near-term catalyst in fiscal third-quarter earnings.
Shapira also points to a long-term runway of double-digit revenue that could power earnings-per-share growth over the next five years.
"As the market digests the many ways to win at RL, we expect shares to revert back to their one-year average multiple of 20X, which drives our price target for 35 percent upside," Shapira writes.
Of TJX , which is getting replaced by Ralph Lauren, Shapira says the company is still a share gainer but notes the stock is up nearly 33 percent since it was added to the conviction buy list. She downgraded TJX to "neutral" with a $72 price target.
Meanwhile, analyst Marc Irizarry shook up the rankings of asset managers, adding Och-Ziff to the bank's top-picks list as he expects that the firm "can generate organic growth near the top of the group (forecasting +5 percent) devoid of flows."
Irizarry increased his price target to $11.50 from $10.50.
Meanwhile, Irizarry removed BlackRock from the bank's conviction buy list "based on relative upside potential but continue to view the thesis as intact." However, BlackRock still earns a "buy" rating from Goldman, and its price target was actually increased to $200 from $185 despite no longer being on the list.
Finally, Goldman analyst Michael Nannizzi recommends buying property and casualty insurance companies "on select positive pricing trends, low industry beta, and some attractive risk-adjusted dividend yields." His best pick is Travelers , which he added to Goldman's conviction buy list, to play on the commercial property theme.
His price target on Travelers rose to $67 from $65.
On the other hand, XL Group gets bounced from the list as Nannizzi notes the company's recent hires to senior level management as well as the stock's high beta.
In downgrading the stock to "neutral," Nannizzi also cut his price target for XL to $22 from $26.
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