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Jefferies says investors should buy these 23 stocks to outperform in an increasingly nervous market - and because they have 135% upside on average

Jefferies says investors should buy these 23 stocks to outperform in an increasingly nervous market - and because they have 135% upside on average

An H-2A rocket carrying the Hope probe lifts off from Japan's Tanegashima Space Center, July 20, 2020.
Kyodo via Reuters




Jefferies says that even with Delta variant concerns on the rise, economy is slowing, not stalling.




Its analysts named a group of stocks that collectively have average upside of 135%.




Jefferies says they could outperform based on the economic recovery or individual catalysts.




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The stock market is at all-time highs and COVID-19 cases are ticking higher, and that might be bringing back some uncomfortable memories of early 2020 for investors.Jefferies' equity research unit says the combination of rising COVID cases, geopolitical issues, and the Fed's position on monetary policy might make for a tough investing environment, but advises against heading for the exits."Economic data releases remain generally encouraging and the lack of stepped-up lockdowns in the US suggest that the progression of the recovery has slowed - not stalled," the firm wrote. "This change of pace provides an opening for outperformance based on single stock selection."The firm says it sees three broad categories of winners that could prove to be severely undervalued if they are able to achieve their aims and if economic progress continues. Those categories are companies with specific catalysts, companies benefiting from structural growth, and those that should outperform because they're so highly levered to the recovery."Companies with more leverage to the economic cycle have seen share prices largely tumble, despite generally solid 2Q results and positive revisions," said Jefferies. "Consequently, many of these companies now appear substantially cheaper than earlier in 2021, when stock prices were loftier and Street forecasts much lower."Others are struggling for more individualized reasons, although some of those are also linked to the effects of the pandemic. Because investors' concerns are significant and the opportunities in individual companies look substantial, the firm polled its analysts and asked for some of their top choices."We asked Jefferies analysts to consider their coverage universes broadly and select companies that may offer the most upside, with leverage to either a continued recovery, secular drivers or stock-specific catalysts," the firm said.Those stocks are listed below, and ranked on how much potential Jefferies analysts say they have. That potential is calculated based on a best-case scenario that the firm provided in the form of an "upside target" that reflects where the stocks could be in a year if everything goes right. The stocks are ranked from lowest to highest here based on how far they would have to rise to reach the "upside target."The firm says that most of these stocks could double in 12 months in a best-case scenario, and that their average upside is 135%.

23. LKQ

Jefferies says investors should buy these 23 stocks to outperform in an increasingly nervous market - and because they have 135% upside on average

LKQ
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