- Jefferies thinks the US economy is firmly in growth mode again, and a team of 12 experts names the 30 stocks that stand to benefit the most.
- The group says chemicals, metals, and building companies are among those poised to climb and reverse some of their recent underperformance.
- Jefferies says signs of life in US manufacturing, business optimism, and prices are signs that it's a good time to invest in economic growth after the sharp downturn in the last few months.
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It might be hard to believe, but according to Jefferies, the economy has hit a turning point without investors noticing.
The firm's equity research team says that there are powerful signs of economic improvement in the US, and that means it's a good time to invest in companies that depend more heavily on economic growth — even though news about the coronavirus pandemic is getting more concerning.
"Despite the natural recovery from one of the most violent contractions we have ever seen, the foundation of the next expansion is real," they wrote. "Industrials, Materials and Financials represent the best ways to play an improving economic backdrop."
A brief list of their evidence: The Philadelphia Fed's Business Outlook Survey and Institute for Supply Management's manufacturing Purchasing Managers' Index are both showing growth, and producer price readings are ticking higher as well.
If that weren't enough, businesses' inventories were depleted in 2019, and they'll build them back up as the economy recovers its strength. That means there's even more room for sales growth.
A team of 12 Jefferies analysts and strategists highlighted these areas of interest: Chemicals makers; copper companies, which could be big beneficiaries as central bank stimulus aids the global economy; housing companies, as people spend more time at home and move from cities to the suburbs; machinery companies and industrial distributors; banks; and oil companies.
These 30 stocks all fall into one of those areas. Almost all are "Buy"-rated, and they're ranked from lowest to highest based on how much upside the stocks have based on Jefferies' price targets. A handful of them have equaled or surpassed those targets in recent days, but the firm still sees them as major beneficiaries of the recovery.
30. IHS Markit
Ticker: INFO
Market cap: $29.5 billion
Industry: Information services
Price target: $71
Upside to target: -6.3%
Source: Jefferies Equity Research
29. S&P Global
Ticker: SPGI
Market cap: $80.3 billion
Industry: Information services
Price target: $339
Upside to target: -3.9%
Source: Jefferies Equity Research
28. W.W. Grainger
Ticker: GWW
Market cap: $16.9 billion
Industry: Industrial distribution
Price target: $298
Upside to target: -3.6%
Source: Jefferies Equity Research
27. TransUnion
Ticker: TRU
Market cap: $16.5 billion
Industry: Information services
Price target: $82
Upside to target: -1.8%
Source: Jefferies Equity Research
26. NXP Semiconductor
Ticker: NXPI
Market cap: $38.5 billion
Industry: Automotive semiconductors
Price target: $118
Upside to target: 0%
Source: Jefferies Equity Research
25. Signature Bank
Ticker: SBNY
Market cap: $5.6 billion
Industry: Banks
Price target: $105
Upside to target: 4.5%
Source: Jefferies Equity Research
24. Fastenal
Ticker: FAST
Market cap: $25.5 billion
Industry: Industrial distribution
Price target: $46
Upside to target: 6.7%
Source: Jefferies Equity Research
23. Dow Chemical
Ticker: DOW
Market cap: $31.6 billion
Industry: Chemicals
Price target: $44
Upside to target: 11.6%
Source: Jefferies Equity Research
22. ON Semiconductor
Ticker: ON
Market cap: $7.8 billion
Industry: Automotive semiconductors
Price target: $24
Upside to target: 11.6%
Source: Jefferies Equity Research
21. Cintas
Ticker: CTAS
Market cap: $28.1 billion
Industry: Diversified services
Price target: $302
Upside to target: 13.4%
Source: Jefferies Equity Research
20. Covestro
Ticker: 1COV GR
Market cap: $7 billion
Industry: Chemicals
Price target: €40
Upside to target: 13.6%
Source: Jefferies Equity Research
19. Timken
Ticker: TKR
Market cap: $3.4 billion
Industry: Machinery and industrials
Price target: $50
Upside to target: 14.3%
Source: Jefferies Equity Research
18. ManpowerGroup
Ticker: MAN
Market cap: $3.9 billion
Industry: Staffing
Price target: $75
Upside to target: 16%
Source: Jefferies Equity Research
17. Masco
Ticker: MAS
Market cap: $13.2 billion
Industry: Building products
Price target: $58
Upside to target: 16.7%
Source: Jefferies Equity Research
16. Truist Financial
Ticker: TFC
Market cap: $50 billion
Industry: Banks
Price target: $40
Upside to target: 19%
Source: Jefferies Equity Research
15. Parker-Hannifin
Ticker: PH
Market cap: $23.5 billion
Industry: Machinery and industrials
Price target: $210
Upside to target: 19.1%
Source: Jefferies Equity Research
14. Chevron
Ticker: CVX
Market cap: $166 billion
Industry: Integrated oil
Price target: $100
Upside to target: 20.9%
Source: Jefferies Equity Research
13. MSC Industrial
Ticker: MSM
Market cap: $3.3 billion
Industry: Industrial distribution
Price target: $78
Upside to target: 21.5%
Source: Jefferies Equity Research
12. Fortune Brands Home & Security
Ticker: FBHS
Market cap: $8.7 billion
Industry: Building products
Price target: $78
Upside to target: 21.6%
Source: Jefferies Equity Research
11. Eastman Chemical
Ticker: EMN
Market cap: $9.5 billion
Industry: Chemicals
Price target: $85
Upside to target: 24.4%
Source: Jefferies Equity Research
10. Equifax
Ticker: EFX
Market cap: $20.8 billion
Industry: Information services
Price target: $207
Upside to target: 27.9%
Source: Jefferies Equity Research
9. TopBuild
Ticker: BLD
Market cap: $3.7 billion
Industry: Building products
Price target: $150
Upside to target: 28.7%
Source: Jefferies Equity Research
8. Freeport-McMoRan
Ticker: FCX
Market cap: $16.5 billion
Industry: Metals and mining
Price target: $17
Upside to target: 31.9%
Source: Jefferies Equity Research
7. BASF
Ticker: BAS GR
Market cap: $52.3 billion
Industry: Chemicals
Price target: $66
Upside to target: 31.9%
Source: Jefferies Equity Research
6. State Street
Ticker: STT
Market cap: $23.6 billion
Industry: Banks
Price target: $82
Upside to target: 33%
Source: Jefferies Equity Research
5. Owens Corning
Ticker: OC
Market cap: $5.8 billion
Industry: Building products
Price target: $75
Upside to target: 36.1%
Source: Jefferies Equity Research
4. Kennametal
Ticker: KMT
Market cap: $2.3 billion
Industry: Machinery and industrials
Price target: $35
Upside to target: 37.4%
Source: Jefferies Equity Research
3. First Quantum Minerals
Ticker: FM CN
Market cap: $5.4 billion
Industry: Metals and mining
Price target: C$18
Upside to target: 42.6%
Source: Jefferies Equity Research
2. ConocoPhillips
Ticker: COP
Market cap: $45 billion
Industry: Integrated oil
Price target: $56
Upside to target: 46%
Source: Jefferies Equity Research
1. Methanex
Ticker: MEOH
Market cap: $1.4 billion
Industry: Chemicals
Price target: $36
Upside to target: 47.6%
Source: Jefferies Equity Research