We’re two months into 2019, and the stock market has changed quite a bit since the start of the year. The panic and volatility of late 2018 is well in the rearview mirror, and the market has rebounded (and calmed down) nicely.
Despite the generally higher stock prices, there are still some compelling bargains to be found. Here’s why five of our contributors think Goldman Sachs (NYSE:GS), Vertex Pharmaceuticals(NASDAQ:VRTX), Hanesbrands (NYSE:HBI), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Broadridge Financial Solutions (NYSE:BR) are worth a look as we head into March.
Major growth catalysts at a discount
Matt Frankel, CFP (Goldman Sachs): As we head into March, Goldman Sachs still looks like one of the best values in banking, if not in the entire stock market.
Thanks to its yet-unresolved “1MDB” bond-fund scandal, Goldman trades for approximately 5% less than its book value. This is especially remarkable considering the bank shattered analyst expectations in the fourth quarter, generating a 12.1% return on equity (10% is the industry benchmark).
One of the catalysts fueling Goldman’s strong performance has been its young but rapidly expanding consumer-banking division, which includes the highly successful Marcus platform for personal loans and high-yield savings accounts. In fact, Goldman’s revenue from “debt securities and loans” grew by 43% in 2018, and the Marcus growth was a big reason for this.
Goldman plans to gradually expand its consumer offerings. A wealth-management product for everyday Americans was announced in late 2018 and could leverage Goldman’s brand power to capture a market it has historically not served. Furthermore, Goldman Sachs is reportedly partnering with Apple on an upcoming co-branded credit card product. Details are limited right now, but it’s fair to say that this has the ability to take Goldman’s credit card business from zero to billions in a relatively short amount of time if it’s successful.
The bottom line is that Goldman simply has too much going for it to trade so cheaply. The 1MDB scandal could continue to weigh on the stock for the time being, but I’m confident that patient investors could be handsomely rewarded.
This company’s target market could nearly double soon
Todd Campbell (Vertex Pharmaceuticals): Data from a key phase 3 trial is expected any moment, but Vertex Pharmaceuticals could be a winner regardless of the results.
Vertex Pharmaceuticals has carved out a multibillion-dollar niche treating cystic fibrosis, a life-shortening disease with limited treatment options. It revolutionized treatment when it launched Kalydeco in 2012, did so again when it rolled out Orkambi in 2015, and most recently with Symdeko in 2018. Increasingly more cystic fibrosis patients with different mutations have become eligible for treatment as these therapies have launched. As a result, Vertex Pharmaceuticals’ revenue has catapulted higher — for instance, its sales increased 40%, to $3 billion in 2018.
Currently, its drugs can only help about half of cystic fibrosis patients. However, it has two distinct triple-drug therapies in development that could allow it to treat up to 90% of patients.
The company already reported positive results from one of the two triple-regimen therapies in 2018. Soon, it will report data from the second one. If data from the second one is better than the first one, it will be filed for Food and Drug Administration (FDA) approval in the second quarter. If not, then the first is the one that will be filed for approval. Either way, Vertex appears on the cusp of significantly increasing its target market.
That has management saying that Vertex Pharmaceuticals “has the potential for significant revenue and earnings growth through the mid-2020s, based solely on treating more patients with our approved and future CF medicines.” Given the near-term data and expected FDA filing in Q2, Vertex Pharmaceuticals is a top stock to target in March.
Explosive gains may not be over
Tim Green (Hanesbrands): A brutal December sell-off sent investors fleeing from apparel manufacturer Hanesbrands, but…
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