The Legal & General [LGEN.L] share price saw a 2% gain last week (through 17 September). Not exactly a noteworthy surge, but what might have caught investors’ attention was that the UK life assurance mainstay found itself on Goldman Sachs list of 13 stocks to beat the market.
The list of stocks – those that analysts at the investment bank consider to be high quality, inexpensive or high growth – features finance, healthcare, and automobile companies, with names including Legal & General, Volvo [VOLV-B.ST], Banco Santander [SAN.MC], Novartis [NOVN.SW] and Adyen [ADYEN.AS]. Opto looks at three of the stocks from the list that Goldman Sachs thinks will beat the market this year and two that the bank says to avoid.
Legal & General share price outpaces FTSE 100
As of 17 September, the Legal & General share price is up just under 1% over the past three months. Despite trading relatively flat over that time frame, it is beating the wider FTSE 100’s 1.8% decline in the same period. Narrowing that time frame to a month, the difference becomes more pronounced with the Legal & General share price up 4.5%, compared to the FTSE 100’s 2.1% loss.
The life assurance major is famous for delivering solid growth and rising payouts to its investors. A trailing price to earnings ratio of 7.49 suggests that the stock isn’t overly expensive, while it carries a hefty 6.28% yield. The company also reported a 14% jump in operating profit in July.
“Stolid, solid stability is the name of the game, and it is these qualities, along with the long-term security and stability of the dividend, that makes [Legal and General’s share price] our pick of the income majors in this sector” - Julian Hoffman
“Stolid, solid stability is the name of the game, and it is these qualities, along with the long-term security and stability of the dividend, that makes [Legal and General’s share price] our pick of the income majors in this sector,” Julian Hoffman wrote in Investors Chronicle.
Analysts polled on Financial Times have pinned a 325p price target on the Legal & General share price, hitting this would see a 16% upside on 17 September closing price.
Can the Volvo share price reverse losses?
The Volvo Group share price has been on a steady decline, dropping by more than 16% since the start of June (through 17 September). In July, the stock managed to claw back some losses after posting $1.12bn in adjusted operating income. Revenue also grew, up 43% year on year to come in at $10.4bn. JPMorgan said that “Volvo printed a good set of results, slightly below street estimates”.
Among analysts polled on the Financial Times, the Volvo share price has an average price target of SEK245 – hitting this would see a 28% upside on 17 September close.
Investors might be interested to know that Goldman Sachs and SEB were leading a planned listing of Volvo Cars in Stockholm. Volvo Group had sold off the car business in 1999 to Ford, which in turn sold it to owner Geely.
Volvo Cars is reportedly looking for a valuation of between $20bn and $30bn in what is one of the biggest European IPOs of the year, according to CNBC. Other banks involved include SEB, BNP Paribas, Carnegie, and HSBC.
Banco Santander share price
The Banco Santander share price is down 7.6% over the past three months (through 17 September). While Banco Santander’s share price has underperformed this year, the past few months have seen analysts back the bank.
Last week, Zacks Investment Research upgraded Banco Santander from a hold to a buy rating, putting a $4.25 price target on the bank’s New York-listed shares. Société Générale [GLE.PA] has a buy rating on the Spanish bank and moved its price target from €3.50 to €3.70 in July. In August, Jefferies analyst Benji Creelan-Sandford upgraded Banco Santander from underperform to hold, upping his price target from €2.50 to €3.10.
However, the stock has an average analyst price target of €6.17 on Yahoo Finance – more than double its 17 September closing price of €3.04.
Two stocks to avoid, according to Goldman Sachs
Goldman Sachs analyst Eric Sheridan initiated coverage on 17 large-cap internet stocks this month. Two stocks that Sheridan isn’t recommending are Airbnb [ARNB] and Twitter [TWTR], with the analyst giving a sell rating to both.
According to Sheridan, Airbnb will continue to grow faster than the wider travel industry, but investors are overly optimistic that Airbnb will benefit from a new normal for the travel industry following the coronavirus pandemic. Sheridan pinned a $132 target on the stock, which would see a 20% downside.
For Twitter, Sheridan thinks the social media platform’s recovery in ad spend revenue has already been priced in, having been decimated at the height of the pandemic. The analyst also questions how successful new features on the platform will be and has put a $60 price target on the stock, representing a near 4% downside on the 17 September close.