Citigroup is charting the road ahead for the second half of 2021, telling clients to buy a handful of stocks that should lead to gains. Citigroup acknowledged the many concerns circling the market currently, like inflation, interest rates and fiscal policy. But the bank still thinks there are opportunities for investors to hunt. "We maintain a cautious view over the next several months, especially since investors might encounter four different catalysts (tapering discussion, inflation, margin pressures and taxation) that could coalesce around the same time," Citigroup chief U.S. equity strategist Tobias Levkovich told clients. "Sentiment remains ebullient, valuation is not attractive and the Street already expects strong profit trends." Overall, Citi continues to like the value rotation, but said there could be a turning point in the second half. "Higher inflation expectations alongside better economic prospects clearly benefit cyclicals and rising bond yields favor Financials," Levkovich said. Citi's analysts have a running stock focus list that highlights the firm's analysts' highest conviction near-term alpha opportunities. Citi analysts pick nonconsensus stocks with catalyst driven upside. Take a look at the list here. Cosmetic company Coty is a top pick in the home and personal care category for Citigroup. The Wall Street firm said it likes what it has seen in the company's transformation efforts. "We have strong confidence in management's ability to lead the company to consistent profitable growth," Citi analyst Wendy Nicholson told clients. Among financial stocks, Citigroup singled out State Street . While banks clearly benefit from a steeper yield curve, "it does take a while for the repricing benefit to flow thru so we tend to gravitate to those banks that will be bigger beneficiaries to a higher 10-year," analyst Keith Horowitz told clients. Horowitz said it likes trust banks like State Street, even after a 15% gain so far this year. Citigroup called health-care giant Cigna "undervalued," setting the stock up for success in the second half. Cigna's "suite of services, cash flow profile ($50B between 2021-2025), and execution should support its 10%-13% growth target," Citi analyst Ralph Giacobbe told clients. "Near-term we continue to see room for upside as cost trends remain manageable." Citi also recommends taking advantage of the e-commerce boom by buying into industrial giant Prologis . The warehouse operator "should benefit from continued demand and growth within the logistics and distribution space driven by ecommerce expansion as well as supply chain transformation across industries," Citi analyst Emmanuel Korchman told clients. General Motors is another top pick for the latter half of 2021, according to Citi. The automaker has a clear path towards its $100 per share price target due to its push into trucks, electric vehicles, and expanding total addressable market. Citigroup also likes Valero Energy , Fiserv , Dell Technologies and Vertex Pharmaceuticals for the second half. — with reporting from CNBC's Michael Bloom.
Pedestrians walk passed signage at Cigna headquarters in Bloomfield, Connecticut.
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Citigroup is charting the road ahead for the second half of 2021, telling clients to buy a handful of stocks that should lead to gains.