Jefferies says top stock picks have room to rise heading into year-end
As the fourth quarter ramps up, several stocks have room to appreciate in coming months, according to Jefferies. Despite heightened volatility in recent months — the CBOE Market Volatility Index is 48% higher over the past three months — the market has already seen gains this quarter. Fueled by a strong start to earnings season, the S & P 500 hit a new intraday record on Thursday, bringing the broad market’s quarter-to-date advance to 1.4%. The same day, the narrower Dow Jones Industrial Average closed at an all-time high and is now higher by 2.2% this quarter. The Nasdaq Composite has increased by about 1% quarter-to-date. Financial stocks from Morgan Stanley to Wells Fargo to JPMorgan have all beaten Wall Street expectations. Heading into the end of the year, Jefferies has updated its list of stock recommendations it calls its “franchise picks,” spotlighting high-conviction, buy-rated names. Consumer health company Kenvue – spun out from Johnson & Johnson last year – and transportation company Saia were among the additions. Companies such as PepsiCo and Sysco were removed. “These 21 top ideas are underpinned by differentiated analysis, supported by catalysts, and sit at valuation levels that suggest upside,” the investment bank wrote in a Thursday note to clients. Here are some of the stocks that made the latest Jefferies list. Integrated oil producer ConocoPhillips could see more upside due to cost savings at its large-scale projects, such as Willow in Alaska, the Port Arthur LNG project in Texas and the North Field East (NFE) in Qatar. Not only that, Jefferies is counting on realized efficiencies and cost savings from Conoco’s deal to buy Marathon Oil , which is expected to close this quarter. “The MRO acquisition provides additional synergies to [capital expenditures/operating expenses] and further upside to earnings/[free cash flow],” the investment bank said. “Following the close of the acquisition, COP will continue to execute on efficiencies and expects to surpass the $500 [million] synergy target it set when the deal was announced.” The Street is similarly bullish on Conoco, with 21 of 27 analysts covering the Houston-based company rating it the equivalent of a buy, according to to LSEG. While analysts’ average price target of $133 reflects more than 25% upside from Thursday’s close, Jefferies sees even more gains ahead, with its own target of $146 implying more than 37% upside. Shares of ConocoPhillips have fallen more than 8% this year. Newly-added Kenvue’s shares are also marginally lower this year, but they’ve risen more than 16% in the past three months and more than 11% in the past six. Those gains may continue, as Jefferies believes an update to its reinvestment and restructuring timeline – as well as topline growth in the U.S. skin, health and beauty category, and overall portfolio optimization – could drive the Skillman, New Jersey-based company’s stock higher. “Higher reinvestment rates are correlated with better returns,” Jefferies added. “A further increase in ’25 (est. 94% reinvestment rate) repositions the business to deliver better results in ’26. Procter and Gamble (PG) and Colgate (CL) are examples where increases in reinvestment dollars were met with top and bottom-line growth inflections.” The Street is less bullish on Kenvue, however, as a majority of analysts are neutral. Their average price target of almost $24 implies roughly 10% upside – less than the nearly 26% that would result if Jefferies’ target of $27 is reached. Jefferies is also more bullish than the Street on Progressive , noting that it’s about 3% above consensus earnings-per-share estimates on the insurance company for 2024 through 2026. Notably, the bank believes Progressive could be a beneficiary of a slowing economy due to better underwriting margins and its very limited balance sheet exposure to credit. Jefferies also believes Progressive’s monthly reports could drive upward revisions of Street estimates for not only this year but also well beyond that. “We believe that the Street doesn’t fully appreciate PGR’s ability to accelerate growth with a relatively reduced ad spend ratio, or the power of continued earn-in of rate increases when loss trends are moderating,” the bank wrote. The stock has had a monster run this year, rallying almost 58%. And Jefferies’ target of $295 implies more than 17% upside from the current price.
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