Goldman Sachs added multiple stocks to its 'conviction list' this year. Here are 12

Published Sun, Aug 8 20217:34 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Goldman Sachs have added a slew of stocks to the bank's "conviction list" for the U.S. so far this year, ranging from tech and energy companies to banks and consumer brands. Goldman's conviction list is made up of buy-rated stocks that the bank expects to outperform. Picks include: Tech Microsoft was added to Goldman's conviction list in March. "Microsoft stands out very uniquely in the technology world given its strong presence across all layers of the cloud stack including applications platforms and infrastructure," equity analyst Kash Rangan stated in an investment research note. The bank expects a "strong" fourth quarter for the company. Goldman also added Salesforce to its conviction list in March. "Salesforce remains poised to be one of the most strategic application software companies in the $1tn+ TAM [technical account management] cloud industry," Rangan wrote. The bank likes its exposure to digital transformation, which accelerated as companies upped their online activities during the pandemic. The bank put cloud computing firm ServiceNow on its conviction list in June. "The company has only ~7,000 customers, a number that we believe can potentially approach 100,000 in the long-run given the broad horizontal applicability of the product set and strong competitive position," Rangan stated in an investment note. "Furthermore, the company is in the very early stages of up-selling and cross-selling its strong enterprise installed base to new products." Consumer brands Sportswear retailer Lululemon , covered by analyst Brooke Roach, was added to Goldman's conviction list in July. Roach said it is "structurally well positioned in a growing category," and liked its direct-to-consumer online business. "The company is better positioned following the pandemic to be a market leader in a secularly growing active/casual marketplace. Growth opportunities are numerous," she added. Fast-food restaurant Chipotle is a "clear digital leader," according to analyst Jared Garber in an investment note. The company was added to Goldman's conviction list in January. The bank likes its "strong" mobile app, loyalty program (with 20 million people signing up over two years), new menu items and drive thrus known as "Chipotlanes." Modelo and Corona beer owner Constellation Brands was added to Goldman's conviction list in February, with analyst Bonnie Herzog liking its "strong" fundamentals. "We believe STZ [Constellation Brands] remains one of the best growth stories across the U.S. Staples universe and is advantageously levered to the most attractive opportunities in alcoholic beverages - premium import beer, hard seltzers, and premium W & S [wine and spirits]," the bank stated in an investment note. Energy The bank put Michigan-based DTE Energy on its conviction list last month after it spun off its midstream business – midstream activities include oil transportation and processing. Analyst Insoo Kim liked its "attractive growth proposition with a de-carbonization focus across its segments that deserve a best-in-class valuation premium." Gas and electricity company NRG Energy was added to Goldman's conviction list in June, expecting "elevated" cash flow from 2022 and "compelling" valuation. "Our target price implies material upside and could prove conservative if a further re-rate occurs," analyst Michael Lapides stated in an investment note. The bank's 12-month month price target on the stock is $53 . Goldman analyst John Mackay called Targa Resources "one of the most compelling companies in our midstream energy coverage" in an investment note, and the bank added the firm to its conviction list in March. Mackay liked its "ramping" free cashflow that can support a "significant buyback program" – stock buybacks are when a company uses excess money to give payouts to investors – and a "doubling of the dividend." Financial and real estate Cincinnati-based Fifth Third Bank was added to Goldman's conviction list in March, with analyst Ryan M. Nash expecting it to be one of the "biggest beneficiaries" of interest rate rises. "We believe it will see top quartile performance when rates rise and it leverages the benefits of medium term cost cuts," he stated in an investment note, adding that it has "significant excess capital," which it expects to contribute to upside. Investment firm Evercore Partners is set to benefit from mergers and acquisitions and fees from advising special-purpose acquisition vehicles (SPACs), according to Goldman analyst Richard Ramsden in an investment note. "We see potential upside surprise vs. consensus on capital distributions, due to the stronger earnings we forecast, coupled with a robust cash position," Goldman stated. It added Evercore to its conviction list in March. Real estate investment trust Realty Income was added to Goldman's conviction list in January. "We believe Realty Income represents one of the best risk/reward propositions in the REIT space," the bank's analyst Caitlin Burrows stated, and she expects its funds from operations to grow 5.3% between 2020 and 2022, versus an industry average of 3.1%.

A Salesforce.Com Inc., left, and a Microsoft Corp. logo, center, hang beside an illuminated icloud icon at the CeBIT 2017 tech fair in Hannover, Germany, on Sunday, March 19, 2017.

Krisztian Bocsi | Bloomberg | Getty Images

Analysts at Goldman Sachs have added a slew of stocks to the bank's "conviction list" for the U.S. so far this year, ranging from tech and energy companies to banks and consumer brands.