Nike stock (NYSE: NKE)
Goldman performed a deep dive analysis into social media and internet trends and determined that Nike is still the dominant cultural force in the space, even with recent struggles in China.
“We note Nike’s brand strength as its number one competitive advantage. While fashion cycles can impact market share in the short term, we note the brand strength will provide support for Nike’s market share gains longer term,” the note said.
Shares of Nike have underperformed this year and are down 7% over the past three months. Concerns about the supply chain, and factory shutdowns in Vietnam in particular, have weighed on the stock.
Goldman noted that “there have been very few times in history when Nike’s stock has underperformed vs. the S&P 500” and when it has — like in 2016, 2011 and 2005 — it went on to outperform the market in subsequent years.
MGM Resorts stock (NYSE: MGM)
The company has been reorganizing its portfolio, selling some of its real estate subsidiaries while also purchasing the operations of CityCenter and The Cosmopolitan in Las Vegas.
According to Credit Suisse, the new structure should make the stock more appealing to investors and open up new opportunities for the company.
“MGM is a consensus Neutral name, owing to a ‘conglomerate discount,’ but we believe sentiment will improve.” This should change now that the company is being streamlined. Furthermore, MGM will end up with $9 billion in cash, which it can use to either buy back a significant portion of its market cap or invest in high-growth areas such as sports betting,” according to the note.
The investment firm acknowledged that the ongoing review of casinos in Macao posed a risk to MGM, but stated that MGM China was only worth $4 per share of MGM stock.
UK stocks to fight inflation
The stocks can be found in a variety of industries, and she believes that despite an uncertain economic outlook, companies that pursue the right future-proofing strategies will see further growth.
Energy stocks are benefiting from rising oil and gas prices, but the bull run will not last forever as the world attempts to gradually transition to renewable energy, according to Streeter.
She singled out BP as an important energy company to keep an eye on, citing its investments in wind energy and electric vehicle infrastructure.
“Although higher oil and gas prices will certainly boost profits in the short term, we’re obviously facing a transition to renewable energy in the long term,” Streeter said.
“So it has to be those companies that look at both the short and long term.” We’ve seen BP and Shell’s share prices rise as the price of oil and gas has risen, but those two companies are also investing in this transition to renewables. “They’ve made a lot of commitments, investing in wind and EV infrastructure,” she said.
BP announced a $220 million investment in solar projects in the United States in June, and its CEO aims to reduce the company’s oil production by 40% while increasing its capacity to generate power from renewable sources.
BP intends to sell $25 billion in fossil fuel assets by 2025 and reinvest a large portion of the proceeds in renewables. On Monday evening, the company’s stock closed at 360.30 pence per share in London, up 1.9 percent for the session.
“In the long run, companies that use higher oil and gas prices to reinvest in new renewable energy sources are the ones we should be paying close attention to,” she said.
Banking is another area to keep an eye on, according to Streeter. Banks that invest in diverse capabilities, like the energy sector, are those to watch, she says.
The senior analyst’s U.K. banking picks are Barclays, HSBC, and Lloyds.
“What you’re seeing in terms of banks is a lot more diversification into other areas,” Streeter observed.
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“The likes of Barclays, obviously its wealth management arm, did particularly well during the pandemic’s huge trading swing.”
“We hear from Lloyds that it just made an acquisition and is looking to expand its retail asset management arm with more provisions for pensions,” Streeter said. “HSBC has pivoted to Asia and is also increasing its wealth management side of the business.”
“What you’re seeing is banks diversifying away from their core business of lending and toward other sources of income.” So you should look at how they’re diversifying to bring in more income streams, because this lower interest rate environment — while it will rise slightly — will be with us for a long time.”
“We believe crypto-based digital assets could form an entirely new asset class,” the bank’s analysts wrote last week in a note.
Consider alternatives to bitcoin.
According to Bank of America analysts, the digital asset ecosystem is “so much more” than bitcoin.
Venture capital investments in digital assets and blockchain alone exceeded $17 billion in the first half of 2021.
“This creates a new generation of companies for trading digital assets, offering new services, and developing new applications across industries such as finance, supply chain, gaming, and social media.” “Yet we’re still in the early innings,” they added. Nonetheless, they warned of regulatory uncertainty as a potential short-term risk.
Here are 12 stocks with a “buy” rating from Bank of America because they are involved in the cryptocurrency space. The bank anticipates at least a 10% return within a year of the initial rating.
- Financials Electronic wallet According to the analysts, PayPal is a “must-own stock.” “We consider [Paypal] to be a scarce asset with accelerating structural tailwinds, while the company is well on its way to transforming its digital wallet/app into a financial ‘Super App’ for its massive global consumer base.”
Some major banks were also on the list of potential buyers.
According to them, JPMorgan Chase created the first bank-backed cryptocurrency in the United States in 2019, while Morgan Stanley allowed access to bitcoin funds for its wealth management clients earlier this year.
- Media Analysts also focused on media companies that have entered the non-fungible token (NFT) space. Fox Corporation, iHeartMedia, Disney, and Warner Music Group are among them.
NFTs, which swept the art world earlier this year, are digital assets designed to demonstrate ownership of a one-of-a-kind virtual item.
“The combination of content, contracts with rights, and the exchange of value in a transparent form that allows participants and owners of those rights to share in the value accretion of future sales has many potential implications for media participants and companies,” according to Bank of America analysts.
- Energy utilities, particularly those in the nuclear power sector, stand to benefit from a push for digital asset mining using low- and zero-carbon energy sources. According to the analysts, nuclear energy has these characteristics as well as the required reliability and ability to operate around the clock.
Nuclear electric power generators Exelon, NRG Energy, and Vistra are among the stocks expected to benefit, according to analysts.
There is a massive exodus of bitcoin miners from China, which once accounted for more than half of the world’s miners. Because of Beijing’s crackdown on digital asset mining, many miners are considering relocating to places like Texas and New York in the United States.
“As digital asset mining migrates to North America as a result of China’s near-complete ban on mining activities,” the analysts write, “public data-center companies may see this niche market as an opportunity.” China’s state planner recently issued a document that included cryptocurrency mining on a draft list of industries where investment is restricted or prohibited.
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Data centers are physical rooms or buildings that house IT and computing equipment — such as mainframes, servers, and databases — that are required to power everything from remote working to online shopping.
According to the BofA report, Digital Realty is the largest wholesale data center operator and is “best positioned” to capitalize on this opportunity.
Equinix is another potential winner. “A greater emphasis on the energy consumption of digital asset mining may increase demand for data center operators with more renewable energy sources,” the analysts wrote. “Equinix data centers are powered by 37% renewable energy, with a goal of 100% renewable energy by the end of the decade.”
Airbnb (NASDAQ: ABNB) stock gets upgraded
“Consensus has ABNB slowing to 17% growth next year, vs. 30% pre-pandemic and almost 100% this year. We believe this reflects over-conservatism on the COVID recovery and a view that Alternative increases are temporary,” the note said.
The growth of Airbnb and other alternative services has outperformed traditional lodging options this year. The market share gain for Airbnb came even as the growth of new hosts slowed during the pandemic, creating another potential tailwind in the years ahead.
“We expect growth in hosts and active listings to resume in [early 2022] to respond to growing demand,” the note said.
Shares of Airbnb, which went public in late 2020, have gained 13.5% year to date but are down more than 20% from their peak in February.
Even as the energy sector rises in value, investors continue to under-invest in it, owing in part to ESG concerns.
Pioneer Natural Resources was one of the names mentioned by the firm, and Goldman recently added the company to its list of convictions. According to Mehta, Wall Street is undervaluing the company’s assets in the Permian Basin.
In a note to clients, the firm wrote, “Pioneer represents a stock that offers strong capital returns in the near term… while still offering long-dated differentiated resources.” Over the last year, the stock has more than doubled and is now approachig the firm’s 12-month target of $213. On Monday, the stock closed at $193.06.
Occidental is another name that Goldman believes will be appealing in the future. Mehta noted that some investors have avoided the stock due to balance-sheet concerns raised by the Anadarko acquisition. However, he believes that is priced in both absolute and relative terms.
“What we believe is underappreciated at OXY is the quality of the underlying assets,” the firm stated. “We see Permian Resources, Chemicals, Low Carbon Ventures, and the Middle East as strong businesses masked by consolidated leverage.”
Exxon is the name to watch among the oil majors, according to Goldman. The firm highlighted Exxon’s differentiated assets in Guyana, as well as the company’s strength in the chemicals and liquefied natural gas divisions.
Furthermore, Mehta claims that the dividend yield, which is the highest among the major US stocks, is “mispriced relative to the sustainable free cash flow.”
“We believe the differentiated asset base, combined with our bullish oil outlook, will drive positive earnings revisions,” Mehta said. Exxon closed at $61.56 on Monday, about 10% lower than Goldman’s 12-month target of $68.