Best stocks to invest in according to Goldman Sachs and Warren Buffett

Goldman Sachs best stocks list

Goldman’s conviction list consists of buy-rated stocks that the bank believes will outperform. Picks include: Microsoft, which was added to Goldman’s list of convictions in March. “Microsoft stands out very uniquely in the technology world because of its strong presence across all layers of the cloud stack, including applications platforms and infrastructure,” equity analyst Kash Rangan wrote in an investment research note. The bank anticipates that the company will have a “strong” fourth quarter.

This year, Goldman Sachs added a number of stocks to its “conviction list.” The bank enjoys its exposure to digital transformation, which has accelerated as businesses have increased their online activities in response to the pandemic.

In June, the bank placed cloud computing firm ServiceNow on its conviction list. “The company has only 7,000 customers, a figure 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 wrote in an investment note. “Furthermore, the company is in the very early stages of up-selling and cross-selling new products to its strong enterprise installed base.”

Brands for consumers

Lululemon, a sportswear retailer covered by analyst Brooke Roach, was added to Goldman’s conviction list in July. Roach praised the company for being “structurally well positioned in a growing category” and praised its direct-to-consumer online business. “Following the pandemic, the company is better positioned to be a market leader in a secularly growing active/casual marketplace. “There are numerous opportunities for advancement,” she added.

According to analyst Jared Garber in an investment note, fast-food restaurant Chipotle is a “clear digital leader.” In January, the company was added to Goldman’s list of convictions. The bank is proud of its “strong” mobile app, loyalty program (with 20 million people signing up over two years), new menu items, and “Chipotlanes” drive-throughs.

Constellation Brands, the owner of Modelo and Corona beers, was added to Goldman’s conviction list in February, with analyst Bonnie Herzog praising its “strong” fundamentals. “We believe STZ [Constellation Brands] remains one of the best growth stories across the U.S. Staples universe and is advantageously leveraged to the most appealing opportunities in alcoholic beverages – premium import beer, hard seltzers, and premium W&S [wine and spirits],” the bank stated in an investment note.

Energy

DTE Energy, based in Michigan, was placed on the bank’s conviction list last month after it spun off its midstream business, which includes oil transportation and processing. Analyst Insoo Kim praised the company’s “attractive growth proposition with a de-carbonization focus across its segments that merits a best-in-class valuation premium.”

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NRG Energy, a gas and electricity company, was added to Goldman’s conviction list in June, with “elevated” cash flow expected from 2022 and a “compelling” valuation. “Our target price implies material upside and may prove conservative if a further re-rate occurs,” analyst Michael Lapides wrote in a research note. The stock has a 12-month price target of $53 set by the bank.

In an investment note, Goldman analyst John Mackay called Targa Resources “one of the most compelling companies in our midstream energy coverage,”. Mackay liked its “ramping” free cashflow, which can support a “significant buyback program” – stock buybacks are when a company uses excess cash to pay out dividends to shareholders – and a “doubling of the dividend.”

Real estate and finance

Fifth Third Bank, based in Cincinnati, was added to Goldman’s list of convictions in March, with analyst Ryan M.“We believe it will see top quartile performance when rates rise and it leverages the benefits of medium term cost cuts,” he wrote in an investment note, adding that it has “significant excess capital” that it expects to contribute to upside.

According to Goldman analyst Richard Ramsden in an investment note, Evercore Partners will benefit from mergers and acquisitions as well as fees from advising special-purpose acquisition vehicles (SPACs). “We see potential upside surprise vs. consensus on capital distributions, owing to the higher earnings we forecast, combined with a strong cash position,” Goldman said. In March, it added Evercore to its list of convicted individuals.

Realty Income, a real estate investment trust, 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,” said the bank’s analyst Caitlin Burrows, who expects its funds from operations to grow 5.3 percent between 2020 and 2022, compared to the industry average of 3.1 percent.

Warren Buffett best stocks list

About 70% of Berkshire’s equity portfolio was in just four companies. Be sure to take a peek at these investments from legendary investor Warren Buffett:

With a market value of $124.3 billion at the end of June, Apple remained Berkshire’s largest common stock investment.

The massive Apple stake was critical in assisting the conglomerate in weathering the pandemic, as other pillars of its business, such as insurance and energy, took a significant hit. Shares of the tech behemoth gained 10% this year, following an 80% gain in 2020, as investors flocked to megacap growth stocks that benefited from the stay-at-home trend last year.

As of the end of June, Berkshire Hathaway owned significant stakes in American Express and Bank of America. Aside from the two stocks, the conglomerate has reduced its exposure to the financial sector. Berkshire exited its positions in JPMorgan Chase and PNC Financial at the end of last year, while drastically reducing its stake in Wells Fargo.

Coca-Cola, Buffett’s long-term bet, had a market value of $21.6 billion. However, the consumer goods behemoth has continued to underperform the broader market, with the stock up only 3% so far this year after a flat year in 2020.