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Top stocks to own for rest of the year, according to Wolfe Research
As September kicks off, Wolfe Research is spotlighting some key stocks to watch for the month ahead. Though August closed out with stocks rebounding from the global sell-off earlier that month, the major averages have been off to a rocky start in September. In fact, the month began with all three indexes suffering their worst days since the Aug. 5 rout. As investors brace for more potential turmoil, Wolfe updated its Alpha List, which is an inventory of the firm’s high-conviction stock picks that it thinks are set to break out over the next year. In its September update, Wolfe has added and removed some names. The additions include Energy Transfer and Fifth Third Bancorp , while the removals include Cheniere Energy and Eli Lilly . Here are a few of the names on the list: As one of the newly added names, Fifth Third Bancorp is also set to outperform, according to Wolfe, as the firm’s target implies more than 16% upside from Wednesday’s close. The firm cites a soft landing scenario as a catalyst due to the company’s low commercial real estate exposure and high-quality consumer exposure. Notably, Wolfe anticipates record net interest income for Fifth Third next year if the Federal Reserve implements five 25 basis point cuts through the end of 2025. Evercore ISI also recently highlighted Fifth Third as a key beneficiary as the Fed lowers rates. Fifth Third shares are up 22% in 2024, and they have a dividend yield of 3.3%. Adobe is one of the names on Wolfe’s list. Though shares are down 3.6% year to date, they’ve skyrocketed more than 28% in the past three months after the company’s fiscal second-quarter results beat estimates . Wolfe sees the stock only going higher from here. From Wednesday’s close, the firm’s price target of $685 implies 19% upside ahead. The firm thinks its current valuation creates an attractive risk-reward profile. “While investor anxiety remains around the competitive landscape, ADBE’s market leadership in creative design for professional use cases and penetration at the enterprise level creates a defensible moat,” Wolfe analyst Alex Zukin wrote in the note. “We believe ADBE will see tailwinds from AI, including faster subscription growth and better monetization of its large installed base, further expanding its competitive moat.” Wolfe isn’t the only one with a bullish stance on Adobe. JPMorgan recently added the name to its September “focus list” as one of its growth strategies and sees it positioned for “smoother sailing ahead.” Digital infrastructure firm Vertiv is another name on the list. Wolfe cites end-market momentum and earnings upside as catalysts for outperformance and sees a “credible” path to more than 20% profit margins. Shares are up more than 56% this year, and Wednesday’s close implies 41% upside to the firm’s target. “Earnings have been hobbled by a delayed price response to inflationary pressures through 2021,” analyst Nigel Coe wrote in the note. “The response has been impressive, with price/cost turning positive through 2H22 and 2023/24. We see additional tailwinds from strong volume leverage and pricing power.” Others on the list include investment firm KKR and retailer Walmart . Both stocks have already seen major gains this year, with KKR rising 42% and Walmart gaining 47%.
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