5 Stocks on Credit Suisse's 'Focus List'

BOSTON (TheStreet) -- The Credit Suisse Focus List, which has outperformed the S&P 500 in each of the past six years, included 18 stocks at the start of 2011. Here's a snapshot of this year's five best-performing picks from the Zurich, Switzerland-based bank.

Polo Ralph Lauren ( RL), +7%
Health Management ( HMA), +8%
Time Warner ( TWX), +10%
Western Union ( WU), +15%
Petrohawk Energy ( HK), +23%

Now, here are five Focus List stocks, still rated "outperform", that offer as much as 79% upside.

5. Cytec ( CYT) is a specialty chemicals and materials company, based in Woodland Park, N.J. Its stock has gained 13% in the past 12 months, but has declined 2% in 2011. Cytec's fourth-quarter net income more than quadrupled to $48 million, or 81 cents a share, even though revenue fell 7% to $700 million. Cytec's gross margin narrowed from 25% to 22% and its operating margin tightened from 6.9% to 6.6%. The company held $383 million of cash and $648 million of debt at quarter's end, for an ample quick ratio of 1.4 and a debt-to-equity ratio of 0.4.

Of analysts covering Cytec, four, or 57%, advise purchasing its stock, two say to hold and one advocates selling. Credit Suisse expects the shares to climb 28% to $67. KeyBank is even more optimistic, with a 12-month target of $68. In contrast, Goldman Sachs ranks Cytec "sell", but values its stock at $54, marginally above the current market price. Cytec sells for a trailing earnings multiple of 18, a forward earnings multiple of 13, a book value multiple of 1.5, a sales multiple of 0.9 and a cash flow multiple of 9.3, 15%, 21%, 63%, 64% and 30% industry discounts.

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4. BlackRock ( BLK) is an investment-management company, offering mutual funds, exchange traded funds and alternative strategies to individual and institutional investors. BlackRock's stock has fallen 19% in 12 months and nearly 4% this year. Its fourth-quarter profit more than doubled to $657 million, or $3.35 a share, as revenue soared 61% to $2.5 billion. The company's gross margin extended from 39% to 41% and the operating margin stretched from 35% to 38%. BlackRock carried $3.5 billion of cash and $4.6 billion of debt at the fourth quarter's end.

Of researchers evaluating BlackRock, 12, or 71%, advise purchasing its stock, four recommend holding and one suggests selling it. Citigroup is most bullish, with a target of $240, implying a 30% gain. Credit Suisse has the next-highest target, at $236. Goldman Sachs, least bullish of the bulge-bracket firms, forecasts a rise to $210. BlackRock trades at a trailing earnings multiple of 18 and a forward earnings multiple of 1.4, on par with asset-management peers. Yet, its sales multiple of 4.1 and cash flow multiple of 14 reflect sizable premiums. The stock currently yields 3%.

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3. Intel ( INTC) is the world's largest semiconductor company and a Dow component. Its stock has dropped 11% in the past 12 months and is down nearly 4% in 2011. Intel's fourth-quarter net income increased 39% to $3.2 billion and earnings per share surged 48% to 59 cents, boosted by a smaller float. The gross margin narrowed from 76% to 75%, but the operating margin remained steady at 35%. Intel has an outstanding liquidity position, with $22 billion of cash and equivalents and $2.1 billion of debt, for a $20 billion net-cash position and 2.7 quick ratio.

Of analysts covering Intel, 34, or 64%, advise clients to buy its shares, 17 suggest holding and three advocate selling. The stock has a median target of $25.48, implying a 26% advance. Raymond James has the highest target on Wall Street, valuing Intel at $31.50, consistent with a return of 56%. Credit Suisse forecasts an advance of 38% to $28. JPMorgan, on the other hand, expects stagnation at $20.50. Intel costs 9.8-times trailing earnings, 9.2-times forward earnings, 2.3-times book value and 6.7-times cash flow, 48%, 37%, 37% and 47% industry discounts.

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2. Bank of America ( BAC) is a diversified financial-services company, with retail-, commercial-, and investment-banking operations. Its stock has fallen 20% in the past 12 months, but has risen roughly 3% this year. Bank of America's fourth-quarter net loss widened to $1.2 billion from $194 million a year earlier. On a per share basis, the loss fell from 60 cents to 16 cents, due to dilution. The gross margin improved from 48% to 61% and the operating margin rose from 15% to 20%. Bank of America had $345 billion of cash and $754 billion of debt at quarter's end.

Of researchers evaluating Bank of America, 20, or 57%, rate its stock "buy" and 15 rank it "hold." None advise selling the bank's shares. A median target of $18.52 suggests an impending 12-month return of 35%. Just yesterday, news broke that the bank was prohibited from boosting its dividend by the Federal Reserve. Raymond James values the stock at $24, expecting it to appreciate 75%. Credit Suisse has a $20 target, consistent with a gain of 46%. Deutsche Bank is pessimistic, forecasting a decline to $13.

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1. Sprint ( S) is a wireless telecom carrier. Its stock has gained 17% in 12 months and 6% this year. But it tumbled 14% on Monday as news broke that AT&T ( T) plans to buy T-Mobile. Sprint is sending representatives to Washington to campaign against the deal, which, it argues, will put it at a strategic disadvantage and thereby hurt the U.S. consumer. Before news of the deal, Sprint was on a run, helped by cost-cutting initiatives. Its fourth-quarter net loss decreased to $929 million, or 31 cents a share, from $980 million, or 34 cents, a year earlier.

Sprint's gross margin contracted from 48% to 45% and its operating margin rose from negative 5.6% to negative 0.9%. Cash and equivalents rose 39% to $5.5 billion and debt hovered above $20 billion. Sprint trades at a book value multiple of 0.9, a sales multiple of 0.4 and a cash flow multiple of 2.8, 73%, 84% and 66% peer discounts. Credit Suisse forecasts that the stock will rise 79% to $8. Similarly, Deutsche Bank is bullish on a turnaround, valuing Sprint at $7, implying 57% upside. In contrast, Sanford Bernstein predicts Sprint will drop 33% to $3 in the next 12 months.

-- Written by Jake Lynch in Boston.

To see these stocks in action, visit the 5 Stocks on Credit Suisse's 'Focus List' Portfolio on Stockpickr.

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