Wells Fargo issues some top tactical investing ideas for the first quarter

Published Wed, Jan 4 202310:41 AM ESTUpdated Wed, Jan 4 20231:53 PM EST

As the first quarter of 2023 kicks off, Wells Fargo has its eye on what it calls stocks that offer tactical trading opportunities. Last year was the worst for stocks since 2008, with the S & P 500 index sliding 19.4% as investors grew increasingly wary of a potential recession and slowdown in earnings. But Wells Fargo's tactical ideas list contains six stocks that the equity research department said might see positive catalysts in the first quarter. Here are three names that made the list: Wynn Resorts ' exposure to the gambling hub of Macao means it should benefit from China's move to reopen its economy after the long, zero-Covid policy. China has said it will drop quarantine requirements for inbound travelers starting Jan. 8. Wells Fargo analyst Daniel Politzer upgraded Wynn to overweight from equal weight on Monday . He also increased the price target by $27 to $101, which implies an upside of 18 % over where the stock closed Tuesday. Macao's recovery "remains the key driver of WYNN's stock," Politzer said in his note. "For the first time in several years, we see better days ahead as China is pivoting from its Covid-zero strategy and easing travel restrictions." Wynn's average analyst rating rose to overweight from hold on Dec. 30, according to FactSet. Shares dropped 3% in 2022, outperforming the S & P 500. Merck also made the Wells Fargo list, with the firm setting a price target of $125. That target implies the stock will gain more than 12% over where it closed Tuesday. The world's fourth-largest pharmaceutical company , measured by revenue, soared almost 45% in 2022. Wells Fargo said Merck's "setup is improving," helped by what it called a "beat-and-raise story" with its Keytruda drug plus broad success in its new drug pipeline. The bank expects positive catalysts from Phase 3 data regarding subcutaneous use of Keytruda, as well as in Merck's trials for drugs that could further treat high cholesterol (Phase 2) and pulmonary arterial hypertension (Phase 3). And Wells Fargo has a $50 price target for Dynatrace , which implies a 30% upside over Tuesday's close. Wells Fargo believes the software company has the "only enterprise-grade cloud platform capable of supporting modern workloads in a hybrid environment." That will help Dynatrace maintain what Wells Fargo called a "best-in-class" operating margin. The bank said investors will listen for plans to accelerate revenue growth while keeping margins strong during Dynatrace's next earnings report and user conference, which are both scheduled for February. Dynatrace, which was listed on the New York Stock Exchange in 2019, lost 36.5% in 2022. — CNBC's Michael Bloom contributed to this report.