Goldman Sachs has added a number of stocks to its conviction list this year – buy-rated stocks that it expects to outperform – giving them a further rise in share price. Rio Tinto Its most recent addition was Australian miner Rio Tinto on March 3. It comes as Goldman Sachs turns bullish on commodities such as iron ore following an expected rally in China. The bank’s analysts said in the March 3 note that it recently raised its iron ore price forecast to $120 per metric ton from $100 on an expected recovery in Chinese steel volumes, between other factors. They also noted the recent ongoing recovery in property sales in China. “Typically, real estate sales kick in, leading to higher steel demand,” the analysts wrote. “Furthermore, this dynamic is playing out as iron ore inventories at Chinese mills are at their lowest level since 2016, with mills starting to restock in recent weeks.” Goldman said it added Rio Tinto to its list of convictions because of its “compelling” relative valuation against its peers, strong free cash flow, dividend yield and given the “bullish view” of the bank on the prices of iron ore, aluminum and copper. That gave Rio Tinto a price target of $140, up 10% from Friday’s close. Rio Tinto released 2022 results last week that showed a 38% drop in annual profit as iron ore prices weakened due to slowing Chinese demand and rising labor costs. ‘work. However, he said the outlook for China should improve, with consumption in the country showing signs of rebounding as it reopens. Sea Another stock that Goldman recently added to its condemnation list is Sea, the Southeast Asian tech giant. The bank raised its 12-month price target for the stock to $132, up more than 100% from the New York-listed stock’s Thursday close. Goldman reiterated its buy rating for the company in a Feb. 16 note, saying it believed the stock would outperform in terms of profitability this year and demonstrate a return to growth. The company’s online shopping platform Shopee and gaming arm Garena are two of its major money-making divisions. Goldman analysts said they see a “visible path to a sustained recovery in the share price” as earnings are expected to turn positive, along with attractive valuations. In its bullish scenario, the banks see the company’s stock price hitting $219, giving it more than 240% upside potential. “Our bullish-downside scenario analysis below suggests an attractive risk-reward outlook, with upside potential of 242% if we were to assume a recovery in the valuation multiple where the Sea segments were trading improving sentiment. /the outlook,” the bank said. Alibaba The additions to the list of convictions above come after Goldman added Chinese tech giant Alibaba in January this year. Alibaba’s outlook has improved in 2023 as China reopens, and the stock is the best way to play a rebound in China’s internet sector, Goldman said. “We forecast further earnings upside and expect more headroom for Chinese internet sector performance on faster than expected China reopening, macro recovery from 2Q and internet regulation normalization “, the bank said in a January 9 note. Goldman also raised Alibaba’s price target to $138, giving it more than 50% upside potential from its U.S.-listed stock’s close on Thursday. – CNBC’s Michael Bloom contributed to this report.
Goldman Sachs Adds Commodities Company to Conviction Buy List