Investors looking for fresh stock ideas in a volatile market can draw some inspiration from Goldman Sachs’ US Conviction List.
Updated monthly, the list features 20 to 25 names curated by an investment committee led by Steven Kron, director of Americas Equity Research.
It’s not an easy task, especially when Goldman Sachs has roughly 1,200 US stocks in its coverage universe. The list includes a selection of the most differentiated buying opportunities in the US stock market, and the committee uses a bottom-up process to determine the top stock picks.
The stocks that make the director’s cut aren’t always the most popular ones, either — the list features many stocks with a less than 50% buy rating from Wall Street analysts.
June marked the two year anniversary of the list. Since its inception, the list’s hit rate, or percentage of stocks that have outperformed a stated benchmark, has been 47% and 52% relative to the cap-weighted and equal-weight S&P 500, respectively.
While the list is meant to provide investment ideas and shouldn’t be treated necessarily as a single portfolio, the cumulative performance of its constituents is quite strong. As a basket, the US Conviction List has returned 46% over its lifetime, outperforming the S&P 500 by 180 basis points and the equal-weighted S&P 500 by 1,560 basis points.
This month, four new names were added, including the banking giant Capital One Financial (COF), which recently acquired competitor Discover Financial Services. After the transaction, Capital One is now the largest credit card issuer in the US, and Goldman Sachs believes the deal will allow the bank to grow its earnings by 34% in the next two years.
Listed below are June’s top stock picks, as well as each company’s market cap, price target, and investment thesis.
