A research team at Goldman Sachs has released a list of stocks which they think have the highest upside when comparing the current price to the team’s price target. Of course, analysts don’t always get it right and an investor might not be able to buy every stock on the list in any case, but a list such as this can serve as a good starting point for further research. Here are Goldman’s picks for 2013:
The investment bank thought that Halliburton Company (NYSE:HAL) had about 50% upside. The $32 billion market cap oil and gas services company certainly seems low priced at 11 times earnings, whether we consider net income on a trailing basis or analyst consensus for 2013. However, despite high activity in the U.S. and modest revenue growth the company actually saw an 11% decline in earnings in the third quarter compared to the same period in 2011. Halliburton was one of the most popular energy stocks among hedge funds for the third quarter of 2012 (see the full rankings). We think that it’s worth it to look more closely at Halliburton; the company should be growing given industry demand, and if it can do so then it will be very undervalued at the current price.
Goldman’s next pick was Newfield Exploration Co. (NYSE:NFX), an oil and gas exploration and production company. Newfield has operations in the onshore U.S. as well as offshore assets in the Gulf of Mexico, Malaysia, and China. The stock is down 33% in the last year, which has brought it to a trailing P/E multiple of only 13. Billionaire David Shaw’s D.E. Shaw increased its stake in Newfield by 6% during the third quarter, closing September with 2.1 million shares in its portfolio (check out D.E. Shaw’s stock picks). It could be another good value play, but we’d note that oil majors generally trade at even cheaper valuations.