These stocks are underappreciated and quietly trending upwards, Wall Street analysts say

Published Sat, Apr 16 20228:07 AM EDT

Investors should focus on buying stocks that may be a bit off-the-radar, Wall Street analysts said this week. These companies are not getting enough attention, analysts say, and have upside potential. CNBC Pro combed through the top Wall Street research to find some of the top underappreciated stocks. They include: Colgate, Nu Holdings , Pool Corp ., Ardagh Metal Packaging and Nokia. Pool Corp. The swimming pool supplies and equipment company was recently initiated with a buy rating by investment firm Stifel. Shares of the company are down more than 26% this year, but analyst W. Andrew Carter said investors need to buy the stock right now. "We believe the underperformance from the 11/18/2021 record high has placed outsized focus on macroeconomic concerns, pushing Pool Corp. shares to a level undervaluing our robust growth outlook," he wrote. The company is not just a pandemic winner either, the firm wrote. "Unlike many 'COVID-era' beneficiaries, Pool Corp. is not enduring outsized expense to remedy strains on its supply chain or internal systems," he said. Carter also said the company has minimal competition — just one U.S. competitor, he noted. And it's largely insulated from inflationary concerns, according to Carter, as 70% of its business doesn't require the company to ship anything to customers. Increased home prices also mean more consumers are splurging on pools, he added. "We believe the category's resiliency is underappreciated amid the underperformance with indicators suggesting continued strength for pool category discretionary demand," Carter said. Colgate-Palmolive Goldman Sachs is standing by shares of the consumer products company and investors should too, the firm said earlier this week. "The company has seen meaningful market share losses since 2016, primarily in oral care, and investors believe consumer duress in EMs could perpetuate this," analyst Jason English wrote. However, he said those fears are "misplaced" and investors need to look at the bigger picture. English cited several reasons for his bullish thesis including that Colgate has seen its market share greatly improve in U.S. oral care and it has had dramatic momentum in its pet food business. "We believe that this positive market share inflection will likely be followed in emerging markets, assuming history repeats and consumers trade down into CL's mass-market portfolio," he added. The firm, which is tied for a Street-high price target of $95 per share, said none of this recovery appears to be priced into the stock. With Colgate shares closing Thursday at $80.94, there's about 17% upside to his target. "The confluence of a very attractive relative valuation and improving overall market share trajectory creates a compelling investment opportunity, in our opinion," he said. Nu Holdings The Latin American fintech company was recently initiated with a buy rating by MoffettNathanson analyst Eugene Simuni. The firm said the company's Nubank digital banking plaform is well-positioned to be a disruptor now and in the future, and it said Nu Holdings is a top pick. Simuni acknowledged there's an ongoing debate about Nubank's growth trajectory. Shares of the company have fallen 25% this year, but the firm said it's sticking with the "underappreciated" stock. "Nu offers a comprehensive set of lending and deposit products, has a regulatory license to operate as a full-service bank, and owns backend infrastructure," he wrote. Simuni also said Nubank's business model is less exposed to macro risks and has a long runway for growth especially with its card issuance franchise. "Nu benefits from 'pure-play' exposure to high growth developing markets," the firm added. Meanwhile, growth may slow down in 2022, but Nubank likely will be generating about $7.5 billion in annual revenue by 2025, the firm wrote. That's why investors need to patient, it said. "In our view, Nu's bulls are likely to be proven right," Simuni said succinctly. Ardagh Metal Packaging — Wells Fargo, Overweight rating "To capitalize on global beverage can growth, AMBP is executing a ~$1.8+ billion internalinvestment program; enabling meaningfulvolume/profit growth through 2024. In light of the fastest EBITDA growth trajectory for beveragecan producers and a newly introduced capital return strategy, we advocate that the AMBP stock is underappreciated versus its peers. As such, we remain bullish on AMBP and reiterate our Overweightrating." Nu Holdings — MoffettNathanson, Buy rating "In our view, Nu's bulls are likely to be proven right. There are four elements of Nu's bull thesis that we believe remain underappreciated. ... .Nu offers a comprehensive set of lending and deposit products, has a regulatory license to operate as a full-service bank, and owns backend infrastructure. ... .Nu benefits from 'pure-play' exposure to high growth developing markets. ... .By 2025 we expect Nu to be generating ~$7.5 B in annual revenue and ~$1.5 B in Adj. EBITDA." Colgate-Palmolive — Goldman Sachs, Buy rating "The company has seen meaningful market share losses since 2016, primarily in oral care, and investors believe consumer duress in EMs could perpetuate this. As we argue below, we believe these concerns are misplaced. ... .we believe that this positive market share inflection will likely be followed in emerging markets, assuming history repeats & consumers trade down into CL's mass-market portfolio. ... .he confluence of a very attractive relative valuation & improving overall market share trajectory creates a compelling investment opportunity." Nokia — Cowen, Outperform rating "What is Underappreciated or Misunderstood? While most of the investment community's focus appears to remain on NOK's wireless business, we continue to see NOK's wireline Network Infrastructure business as a key driver of likely upside in CY22 and beyond. We see ongoing strong underlying market demand trends across all of NOK's wireline Network Infrastructure businesses—IP Networks, Fixed Networks, Optical Networks and Subsea Networks businesses." Pool Corp. — Stifel, Buy rating "We believe the underperformance from the 11/18/2021 record high has placed outsized focus on macroeconomic concerns, pushing Pool Corp. shares to a level undervaluing our robust growth outlook. ... .Unlike many 'COVID-era' beneficiaries, Pool Corp. is not enduring outsized expense to remedy strains on its supply chain or internal systems. ... .We believe the category's resiliency is underappreciated amid the underperformance with indicators suggesting continued strength for pool category discretionary demand."

Colgate-Palmolive's Colgate Total brand toothpaste

Andrew Harrer | Bloomberg | Getty Images

Investors should focus on buying stocks that may be a bit off-the-radar, Wall Street analysts said this week.