Credit Suisse's Top 10 Stocks for 2017

Equities have surged since the November 2016 election, as investor optimism, strengthening economic data and corporate profits have continued. With the bull market having just passed eight years, experts think there's more room to run -- if investors know where to look.
 
Research firm Credit Suisse has put together a list of 140 "top ideas" covered by their analysts, using several parameters to weed out weaker companies and pick only the best ideas. Market caps, growth and valued companies, as well as a variety of different sectors were chosen.
 
As part of the investment process, each analyst ranked up to three stocks on a six and twelve month time horizon, only picking "high conviction ideas." Since not every analyst had three stocks that could make the list, they were allowed to pick fewer than three names.
 
TheStreet looked at the 140 names and broke it down even further, looking at ten of the best #1 picks from Credit Suisse's U.S. Focus List.
 
 

Apple
Apple

Name: Apple

Market Cap: $728 billion

Recent Price: $139.14

Price Target: $150

Credit Suisse analyst Kulbinder Garcha thinks Apple (AAPL - Get Report) has a lot going for it, including its growing Services business, but it still boils down to iPhone and iPad growth.

"Multiple growth drivers including increasing share within compute (iPhone, iPad, Mac) and greater adoption of the iOS ecosystem as well as a commitment to cash distributions," Garcha wrote to investors. "Additionally, the market may underestimate the gross profit contribution from Services, but more important, its growth potential and the annuity type business it drives in terms of retention and replacement across the business."

 

Blackstone
Blackstone

Name: Blackstone

Market Cap: $34 billion

Recent Price: $28.94

Price Target: $40

Credit Suisse's Craig Siegenthaler noted that the markets aren't giving enough attention to Blackstone's (BX - Get Report) earnings power, as the private equity giant is growing its assets under management, which could lead to earnings growth over the next few years.

"Key to our investment thesis is BX's ability to innovate product and raise large amounts of capital," Siegenthaler wrote to investors. "Over the past three years, Blackstone has raised a similar level of capital to its four largest public competitors combined, and has generated the strongest FE AuM growth rate (despite being the largest)."

Celgene
Celgene

Name: Celgene

Market Cap: $98 billion

Recent Price: $124

Price Target: $148

Credit Suisse analyst Alethia Young likes Celgene's (CELG - Get Report) ability to grow its pipeline, but also the biotech's stock price compared to its future prospects.

"We see more upside on base business products than consensus and guidance," Young wrote to investors. "We like Celgene's pipeline that consists of internal and external candidates that leads us to believe it is best in class."

Facebook
Facebook

Name: Facebook

Market Cap: $402 billion

Recent Price: $138.79

Price Target: $170

Credit Suisse's Stephen Ju believes that even though Facebook (FB - Get Report) is slowing its ad loads, it will still drive revenue growth, thanks to Instagram, premium video and Facebook's dynamic product ads.

"Street models continue to underestimate the long-term monetization potential of upcoming new products (Graph Search) & optionality and upward bias to estimates, which do not contemplate contributions from multiple other products including Messenger and WhatsApp," Ju wrote.

21st Century Fox
21st Century Fox

Name: 21st Century Fox

Market Cap: $56 billion

Recent Price: $30.55

Price Target: $37

Credit Suisse analyst Omar Sheikh believes that following Fox's (FOXA) acquisition of the 61% of Sky News it didn't already own, as well as growth opportunities from Hulu and Star India, its exposure to the NFL and MLB, Fox has a bullish tilt toward it.

 

Johnson Controls
Johnson Controls

Name: Johnson Controls

Market Cap: $38 billion

Recent Price: $41.23

Price Target: $51

Julian Mitchell, who covers Johnson Controls for Credit Suisse, believes that Johnson Controls (JCI - Get Report) is not being properly valued by the markets just yet, but as it continues to work on its synergy plan, the stock should rise. 

"We do not think that the current valuation is a fair reflection of the earnings growth potential of JCI; it should be able to achieve mid-double-digit EPS growth over the next few years, without much reliance on top-line growth," the analyst wrote.

J.P. Morgan
J.P. Morgan

Name: J.P. Morgan

Market Cap: $327 billion

Recent Price: $91.28

Price Target: $96

Credit Suisse's Susan Katzke likes J.P. Morgan's (JPM - Get Report) "best-in-class execution," as well as its ability to grow revenue organically, manage expenses and optimize capital, all of which should help boost earnings growth and return on equity.

"Fourth quarter 2016 and CCAR results were consistent with our confidence in recommending this stock," Katzke said.

KLA Tencor
KLA Tencor

Name: KLA Tencor

Market Cap: $15 billion

Recent Price: $93.20

Price Target: $96

Credit Suisse analyst Farhan Ahman notes that KLA-Tencor (KLAC - Get Report) should be ability to grow revenues above a 5% compounded annual growth, while continued to expand operating margins.

"In addition it is benefitting from the favorable Gen 5 product cycle, which can allow it to grow its revenues above industry in CY17 and CY18," Ahman wrote to investors. "We also believe that valuations are attractive and investors are underestimating both growth and margins for the business."

Walgreens-Boots Alliance
Walgreens-Boots Alliance

Name: Walgreens Boots Alliance

Market Cap: $93 billion

Recent Price: $85.63

Price Target: $97

Credit Suisse analyst Robert Willoughby said that a successful closure of the Rite Aid (RAD - Get Report) deal should help Walgreen's (WBA - Get Report) , growing not only revenue, but helping costs and capital savings to increase cash flow "materially higher."

"Market share gains from an ongoing industry transition toward preferred/narrow pharmacy networks should boost organic growth, while generic sourcing capabilities further improve," Willoughby wrote. "Downside from the deal not closing as expected is manageable, in our view, given new PBM preferred pharmacy network agreements, contributions sooner than expected from the early AmerisourceBergen warrant exercise, and ongoing capital deployment."

Whole Foods
Whole Foods

Name: Whole Foods

Market Cap: $9.3 billion

Recent Price: $29.19

Price Target: $36

Credit Suisse analyst Ed Kelly said tat despite a difficult food retailing industry, Whole Foods (WFM) has a good risk/reward proposition.

"Management is cutting prices, has slowed growth, is accelerating private brand penetration, aggressively reducing costs, enhancing marketing, investing in technology, and streamlining category management (recently announcing a new partnership with Dunnhumby)," Kelly wrote. "Though results have been pressured and weakening industry conditions have been a challenge, the risk/reward remains compelling."

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