Goldman Sachs names 4 global stocks it thinks will deliver superior returns

Published Mon, Feb 7 202210:37 PM EST

Goldman Sachs has named a number of global "alpha opportunities," which it says are inexpensive stocks set to beat earnings expectations. The bank expects Europe to outperform the U.S this year. "Once the Euro-area gets through near-term challenges from surging Covid cases and energy prices, [Chief European Economist] Jari Stehn expects Europe to outperform the US," Goldman said in a note on Feb. 4. "Notably, Jari still sees significant pent-up demand in services spend across Europe and looks for persistent fiscal support in the region." Against this backdrop, investors should look for attractive company characteristics across sectors and regions, according to one of the bank's top equity strategists Peter Oppenheimer. "Ultimately, investors will pay for companies that can grow, but Peter notes that the source of that growth, the region or the industry it may be in will become less relevant - and this should mean a return to Alpha," the bank said, referring to returns earned by beating the market. Stock picks Goldman analysts, led by John Sawtell, screened for stocks that were both "inexpensive" — trading at a discount of 20% or more to their historical pricing — and where the bank is more bullish than the market on earnings estimates. All of the stocks on the screen are buy-rated by the bank. The screen turned up oil major BP , which the bank believes is on the cusp of delivering one of the industry's strongest pipelines of new oil and gas projects. This will support free cash flow growth and cash returns to shareholders, Goldman analyst Michele Della Vigna said. The oil major is also intensifying its focus on cost efficiency and de-carbonization, he added. The bank has a price target of 600 pence ($8.10) on the stock, implying a potential upside of 47.8%. to its closing price of 405.9 pence on Feb. 4. Commodities giant Glencore also appeared on Goldman's screen. The company "stands out" within the sector for its shareholders returns and free cash flow generation, analyst Jack O'Brien said. The mining firm has exposure to copper and key battery metals such as nickel and cobalt, which bodes well for the company's long-term prospects, O'Brien added. The bank has ascribed a price target of 480 pence on the stock, which closed at around 402 pence on Feb. 4, representing a potential upside of 19.3%. Goldman sees German automaker Mercedes-Benz as an "attractive equity story" on the back of the company's premium position, pricing, electrification and other factors. The company also screens well on positive earnings revision and company-specific catalysts, analyst George Galliers said. The bank has a price target of 102 euros on the stock, which implies a 50.4% potential upside on the stock's closing price of around 68 euros on Feb. 4. Swedish telecommunications firm Ericsson makes the list too, with Goldman forecasting strong demand for the global wireless market this year. Analyst Alex Duval sees "robust momentum" for the company in North America, where he expects it to achieve a larger share of the market. The company should also see broad-based market share gains in Asia and Europe, Duval added. Goldman said a steady pace of network launches should also benefit Ericsson's 5G business, which will progressively contribute to the company's profitability this year. The bank has a price target of 155 Swedish krona ($17) on the stock, which closed at around 114 Swedish Krona on Feb.4 — an implied upside of 36.3%. BP, Mercedes Benz, and Ericsson are also on the bank's global conviction list — its list of its top buy-rated stocks.

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Goldman Sachs has named a number of global "alpha opportunities," which it says are inexpensive stocks set to beat earnings expectations.