Less than a week ago, Goldman Sachs private wealth management chief investment officer Sharmin Mossavar-Rahmani stoked investor worries with a comment putting the chances of a recession hitting the U.S. in 2020 at somewhere between 25% and 30%.
But less than a week later, Goldman global strategist Peter Oppenheimer seemed to say the opposite, telling CNBC: "This downturn in manufacturing has been one of the longest on record and may start to stabilize, if not improve, somewhat soon ... Growth has slowed but [the economy] is not close to recession," he concluded.
And we have to say -- this all seems terribly confusing. So are we facing a recession risk or aren't we? According to the investment banker's latest thinking, instead of crashing, the economy is doing just fine, and stock markets that slumped on Monday could quickly rebound, sending the S&P 500 up as much as 5% by the end of this year. But what if Goldman is wrong now, and what if it was right last week?
Just to be safe, we've asked the Stock Screener at TipRanks to suggest for us a few stocks receiving "buy" or stronger ratings on Wall Street, and receiving "buy" ratings from Goldman Sachs in particular. Whether the economy does well or poorly in general, either way, Goldman Sachs at least thinks these three stocks will do well. Let's take a closer look:
Lamb Weston Holdings (LW)
Lamb Weston Holdings isn't the sexiest stock pick on the planet, but if you're looking for a recession-resistant stock, you might well want to put this one in your pantry. Lamb Weston, you see, produces and sells frozen potatoes, sweet potatoes, and appetizers to restaurants, grocers, and wholesalers. And no matter how bad any recession gets, we doubt it's going to get so bad that people can't afford potatoes.
Potato supplies look "average" in 2020, input costs are "benign," and pricing is "consistent with ... expectations." But in a note released last week, Goldman analyst Adam Samuelson cited strength in the quick-serve restaurant channel driving "organic volume growth of 6%" as one key reason to like the stock. (To watch Samuelson's track record, click here)
In fact, with earnings estimates on the rise -- up about a penny for 2020 to $3.56 per share, and up $0.12 and $0.11 respectively in 2021 and 2022 -- Samuelson is confident enough in this one to rate Lamb Weston a "buy" with a $85 price target, 5% above the consensus price on Wall Street, and good enough for a 12% gain from today's prices. Throw in a modest 1.1% dividend yield, and Lamb Weston should comfortably outperform the market going forward.
All in all, TipRanks reveals the potato giant as one drawing bullish attention on Wall Street. Out of 4 analysts polled in the last 3 months, all 4 are bullish on LW stock. The 12-month average price target stands at $81.25, marking a 7% upside potential from where the stock is currently trading.
Another low-profile stock pick that nonetheless caught Goldman's eye this week is investment bank Moelis. You may not have heard of this one -- with a market capitalization of only $1.5 billion, Moelis flies far below the heady heights of better-known investment banking names like JPMorgan... or Goldman Sachs. But by the same token, the fact that Goldman Sachs itself thinks this one is worth a look may carry some weight.
As you've probably heard by now, the U.S. is currently enjoying its longest economic expansion in history. Whether that means a recession is just around the corner, or not, we're almost by definition way deep into the economic cycle. And 4-star Goldman analyst Richard Ramsden thinks that Moelis is just the kind of stock to own if you want to be "levered to later-cycle activity" such as corporate restructurings.
Ramsden also likes the fact that as America's expansion gets a bit long in the tooth, Moelis offers exposure to markets overseas. "Roughly half" the company's M&A business year to date, says Ramsden, has been "cross-border" -- twice the average among investment banks.
Speaking of which, investment bankers on average believe Moelis stock could tack on as much as 29% gains over the next 12 months. But just in case they're wrong about that, and things do turn south for the economy, Moelis offers investors a beefy 6.5% dividend yield!
E*Trade Financial (ETFC)
Last but not least, we come to the stock that's been garnering all the headlines lately.
Last week, discount brokerage Charles Schwab cut the commission it charges on stock and ETF trades to $0, damaging its own stock price in the process, and blowing a gaping hole in the stock prices of rivals TD Ameritrade and E*Trade as well. At a share price just 9.2 its trailing earnings, E*Trade stock now sells for a big 15% discount to what it fetched just a week ago.
And that's... okay.
Historically, says Goldman Sachs analyst Will Nance, America's discount brokerage stocks have sold for valuations of about 15 to 16 times earnings. Measured against that yardstick, E*Trade stock at 9.2 times earnings looks like a screaming bargain.
Now, the situation isn't quite as attractive as it seems. Nance warns that in a doomsday scenario in which the Fed cuts interest rates to zero, discount brokerage stocks could still have farther to fall -- perhaps as much as another 30%. But zero interest rates aren't a certainty, nor would they last forever even if they do happen temporarily.
As such, Nance sees a good 15.5% upside in the stock as he rates it a "buy" along with $43 price target.
Where does the rest of the Street side on this brokerage giant? It appears mostly bullish, as TipRanks analytics demonstrate ETFC as a Buy. Out of 9 analysts polled in the last 3 months, 5 are bullish on E*Trade stock, 3 remain sidelined, and only one is bearish. With a return potential of nearly 20%, the stock’s consensus target price stands at $44.56. And yes, the fact that E*Trade pays a respectable 1.6% dividend yield doesn't hurt one bit.