After last year’s dismal stock-market performance, RBC Capital Markets strategists forecast an unchanged to low-single-digit return for the S&P 500 this year.
“We expect choppy conditions over the next few quarters, between deeply bearish sentiment (a contrarian bullish signal) and ongoing concerns about the outlook for the economy, the Fed, geopolitics, and earnings,” RBC wrote in a commentary.
Amid this environment, its analysts made their top 30 global stock picks. Primarily U.S. companies on the list include (in alphabetical order):
American International Group (AIG), the insurer. “The company has made progress on improving core loss ratios, and we expect the trends to continue, along with profitable premium growth,” RBC said. It’s “an attractive value idea in the insurance space.”
Anheuser-Busch InBev (BUD), the brewer. “Currencies remain the unknown, but we think AB InBev's grip on the more controllable factors is tightening,” RBC said. “The short-term performance has been more consistent, volume growth is improving, and the company’s medium-term ambition of 4% to 8% Ebitda growth looks realistic.”
CrowdStrike (CRWD), a cybersecurity company. It’s a “prime land-and-expand model benefiting from software as a service delivery and ability to rapidly add more modules with no extra configuration or consulting,” RBC said. “The long-term power of the installation base should lead to strong net expansion rates.”
Diamondback Energy (FANG), an oil producer. “The company is one of a few that have amassed a combination of quality assets, strong economic growth, minerals ownership, and a water business, which collectively help to provide a competitive advantage,” RBC said.
DuPont (DD), the chemicals company. “DuPont’s valuation multiples could increase two to three times should it successfully market itself as a multi-industrial company,” RBC said. “DuPont will continue assessing its portfolio to divest unaligned businesses to deliver shareholder value.”
M&T Bank (MTB). M&T has “best in class management,” wise “allocation of capital,” a “strong balance sheet, [and] superior underwriting standards,” RBC said. The bank is also “a low cost provider,” and “long-term investors are rewarded.”
Mastercard (MA), the credit card company. “MA is a core long-term holding and an indexed way to play payments and to benefit from three global secular megatrends: global consumption, global digitization of payments and global innovation, which is creating new payment flows,” RBC said.
Meta Platforms (META), the social networking company. “In possessing the largest user base and the deepest amount of data of that user base, we believe META can compound 15% to 20%-plus earnings growth once it gets through its currently elevated investment cycle.
S&P Global (SPGI), a financial data service. “We believe that the IHS Markit acquisition should … deliver double-digit earnings growth, driven by upside to revenue and cost synergies,” RBC said. The acquisition “should propel SPGI’s ESG [environmental/social/governance] offerings and private company offerings.”
SBA Communications (SBAC), a cellphone-tower owner. “SBAC uniquely benefits among the national tower operators from its higher exposure to U.S. macro tower leasing drivers, with relatively less exposure to international markets with choppier operating trends,” RBC said.
The author owns shares of DuPont and Mastercard, and his girlfriend works at SBA Communications.
