Editor’s note: This article was first published in January 2014; the target prices and P/E ratios it cites are from that time. Several of the companies have since been acquired, renamed or split, among them Starwood, DirecTV, Dresser-Rand, Aetna and General Electric. These stock picks and targets date from January 2014 and are kept as a historical record. They are not investment advice.
Last week we looked for emerging economies to invest in during 2014 with an eye on future growth, and concluded that, even though it means taking on more risk, investing in those small countries could be far more profitable. In the same vein, Morgan Stanley recommended 40 stocks that, in its view, would grow impressively regardless of the crisis, although the list was packed with technology stocks, some of them with dizzying P/E ratios.
This time it is Citigroup that has studied and analysed these 23 companies which, in its view, could have a lot of potential in 2014, despite their strong performance in 2013. And the truth is that I like most of these stocks for an “average conservative” investor who wants to diversify a portfolio with these Wall Street companies.
| # | Company | Sector | Target price | P/E | Citi’s reasoning |
|---|---|---|---|---|---|
| 1 | Starwood Hotels & Resorts | Consumer discretionary | $85 | 26.1 | Global growth opportunities. |
| 2 | Harley-Davidson | Consumer discretionary | $79 | 18.2 | Improving retail sales trends, investment and consumer recovery. |
| 3 | Charter Communications | Consumer discretionary | $167 | 52.6 | Solid track record. |
| 4 | DirecTV | Consumer discretionary | $79 | 13.0 | Subscriber growth in Latin America should remain robust; strong share buyback activity. |
| 5 | Ralph Lauren | Consumer discretionary | $204 | 17.3 | – |
| 6 | Starbucks | Consumer discretionary | $93 | 24.5 | Progress in the US and improvement internationally. |
| 7 | Newell Rubbermaid | Consumer discretionary | $36 | 16.0 | Aggressive cost cutting will help offset a difficult environment. |
| 8 | Procter & Gamble | Consumer staples | $95 | 17.4 | A business model with relatively dominant market share and a balanced brand portfolio. |
| 9 | Valero | Energy | $56 | 9.6 | – |
| 10 | Dresser-Rand | Energy | $66 | 16.3 | A long-cycle play on global investment in oil and natural gas infrastructure. |
| 11 | Blackstone | Financials | $35 | 13.1 | Strong strategic positioning and market share, and growing allocations to alternative investments. |
| 12 | JPMorgan Chase | Financials | $72 | 13.3 | A strong capital position that should increase market share. |
| 13 | General Growth Properties | Financials | $24 | 17.4 | Improving balance sheet and portfolio quality. |
| 14 | Macerich Co | Financials | $68 | 16.7 | Solid balance sheet, good internal and external growth drivers. |
| 15 | Aetna | Health care | $72 | 12.2 | Growth potential. |
| 16 | Armstrong World Industries | Industrials | $65 | 27.5 | Better prospects for non-residential construction and an attractive valuation. |
| 17 | General Electric | Industrials | $32 | 16.5 | Attractive valuation; share buybacks remain a priority. |
| 18 | eBay | Information technology | $63 | 19.2 | Uniquely positioned, attractive valuation. |
| 19 | Applied Materials | Information technology | $20 | 16.1 | Stronger revenue growth expected. |
| 20 | Texas Instruments | Information technology | $45 | 22.9 | – |
| 21 | Amphenol | Information technology | $93 | 23.7 | Its market is growing. |
| 22 | LyondellBasell Industries | Materials | $91 | 13.4 | – |
| 23 | American Tower Corp | Telecommunication services | $89 | 42.2 | Improving valuation metrics and upside potential. |
See also: Why Warren Buffett doesn’t like investing in commodity companies either
See also: 18 truths about investing that come as a cold shower to many
Featured image: Gryffindor, CC BY-SA 3.0, via Wikimedia Commons.
