GOLDMAN SACHS: Buy these 16 stocks that are underestimated for now, but should crush expectations in 2021-22 on the way to at least 20% upside

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FILE PHOTO - Traders work at the New York Stock Exchange (NYSE) in New York, U.S., February 4, 2020. REUTERS/Bryan R Smith Traders work at the New York Stock Exchange

  • The “momentum trade,” or buying the best-performing stocks in the belief they’ll continue to outperform, has been a very successful strategy.
  • With the economy coming out of a recession, more investors are looking at other approaches for 2021.
  • Deep Mehta of Goldman Sachs is highlighting a group of stocks that his firm thinks will handily beat earnings expectations for the next two years. 
  • Visit Business Insider’s homepage for more stories.

Buying stocks that are already big winners has been a very successful strategy in recent years, but there are signs 2021 is going to be different — and there are still plenty of hard-hit stocks to choose from.

For investors who are looking for companies that are going to turn around their fortunes in the near future, Deep Mehta at Goldman Sachs recently identified some of the stocks that could have a chance at a dramatic reversal.

Mehta names a series of stocks that get top ratings from Goldman’s analysts, who are substantially more optimistic about the stocks and the companies’ future earnings than Wall Street at large.

“These names appear underappreciated by the market and could generate alpha for investors with a contrarian view,” Mehta said. 

Each of the following 16 stocks is rated “Buy” by Mehta’s firm, and seven of them — EOG Resources, Raytheon, Amgen, Alphabet, Oracle, Axalta, and Wingstop — get an even bigger vote of confidence because they’re on the “Conviction Buy” list.

The Goldman analysts diverge from Wall Street when it comes to the earning potential of these stocks. Mehta says that Goldman’s estimates for their 2021 and 2022 earnings per share or their earnings before interest, taxes, depreciation, and amortization are at least 5% above consensus.

If achieved, those more optimistic projections could become fuel for the stocks. The 16 companies are ranked from lowest to highest based the upside implied by Goldman Sachs’ 12-month price targets. Those percentages were calculated as of November 17.

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16. Southwestern Energy Southwestern Energy



Ticker: SWN

Sector: Energy

Market cap: $1.7 billion

Upside to target: 20%

Source: Goldman Sachs

15. Wingstop Wingstop



Ticker: WING

Sector: Consumer discretionary

Market cap: $3.8 billion

Upside to target: 20%

Source: Goldman Sachs

14. Snap Snap



Ticker: SNAP

Sector: Communication services

Market cap: $67.5 billion

Upside to target: 20%

Source: Goldman Sachs

13. Oracle Oracle



Ticker: ORCL

Sector: Information technology

Market cap: $169.1 billion

Upside to target: 21%

Source: Goldman Sachs

12. PPD PPD



Ticker: PPD

Sector: Healthcare

Market cap: $11.8 billion

Upside to target: 21%

Source: Goldman Sachs

11. Axalta Coating Systems Axalta



Ticker: AXTA

Sector: Materials

Market cap: $6.7 billion

Upside to target: 23%

Source: Goldman Sachs

10. EOG Resources EOG Resources



Ticker: EOG

Sector: Energy

Market cap: $29.4 billion

Upside to target: 23%

Source: Goldman Sachs

9. First Solar First Solar



Ticker: FSLR

Sector: Information technology

Market cap: $9.2 billion

Upside to target: 24%

Source: Goldman Sachs

8. Allstate Allstate



Ticker: ALL

Sector: Financials

Market cap: $30.9 billion

Upside to target: 24%

Source: Goldman Sachs

7. Amgen Amgen



Ticker: AMGN

Sector: Healthcare

Market cap: $129.6 billion

Upside to target: 25%

Source: Goldman Sachs

6. Oshkosh Oshkosk



Ticker: OSK

Sector: Industrials

Market cap: $5.8 billion

Upside to target: 25%

Source: Goldman Sachs

5. Raytheon Technologies Raytheon Technologies



Ticker: RTX

Sector: Industrials

Market cap: $110.5 billion

Upside to target: 25%

Source: Goldman Sachs

4. Twitter Twitter



Ticker: TWTR

Sector: Communication services

Market cap: $35.8 billion

Upside to target: 28%

Source: Goldman Sachs

3. Alphabet Alphabet



Ticker: GOOGL

Sector: Communication services

Market cap: $1.17 trillion

Upside to target: 28%

Source: Goldman Sachs

2. Viper Energy Partners Viper Energy



Ticker: VNOM

Sector: Energy

Market cap: $741 million

Upside to target: 29%

Source: Goldman Sachs

1. Wayfair Wayfair



Ticker: W

Sector: Consumer discretionary

Market cap: $25.5 billion

Upside to target: 51%

Source: Goldman Sachs

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