Citigroup has released its Global Equity Quarterly report which includes forecasts for a minimum 20% rally in global stock markets by the end of 2012. Better yet, the report includes Citi’s top stock picks compiled by their top strategists, which we list below.
Citigroup projects a 2% EPS growth in 2012 and 2.9% global GDP growth – numbers that conflict with current market conditions. But Citigroup is aware. They believe the global stock markets are pricing in a global recession that will be somewhat corrected by the forecast 20%+ rally in global markets. (via Business Insider)
Citigroup is not alone in expecting a rally.
Luis Basenese of Wall Street Daily wonders if a “nasty correction is looming on the horizon” or if the market is “gearing up for a triumphant year-end rally.” Like Citigroup, he believes there’s more than enough evidence to support the latter.
“A research report from McKinsey & Co. found that analysts are “prone to making increasingly inaccurate forecasts when economic growth declined.” And in 2011, GDP growth has done precisely that. In the fourth quarter of 2010, GDP growth checked-in at 3.1%. Yet, in the most recent quarter, GDP growth fell to 1.3%.” He reasons that if analysts are wrong again and earnings growth trump forecasts, then share prices will rally in response.
Another indicator is the most aggressive insider buying seen since March 2009. “Insiders sell shares for a host of reasons. But they only buy shares for one – to make money. And they’re practically salivating over the opportunities right now… Should we behave any differently?”
Citigroup’s analysts and Basenese are taking contrarian stances on the economic forecasts. Do you think they’re right to do so?
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
So what stocks did Citigroup think would be the best additions to your portfolio? We list the top 5 stocks trading on US exchanges below. If the year-end brings a 20% rally, do you think these stocks will be one of the greater beneficiaries?
1. American Express Company (AXP, Earnings, Analysts, Financials): Market cap of $54.63B. Provides charge and credit payment card products, and travel-related services worldwide. Citi’s comment: “Forecast +25% RoE.” The stock has had a couple of great days, gaining 5.8% over the last week.
2. Archer Daniels Midland Company (ADM, Earnings, Analysts, Financials): Market cap of $17.61B. Archer Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. Citi’s comment: “Improving corn sweetener and processing fundamentals.” The stock has had a couple of great days, gaining 7.11% over the last week.
3. EMC Corporation (EMC, Earnings, Analysts, Financials): Market cap of $47.58B. Develops, delivers, and supports the information and virtual infrastructure technologies and solutions. Citi’s comment: “Clear leader in networked storage.” The stock has had a couple of great days, gaining 10.03% over the last week.
4. MetLife, Inc. (MET, Earnings, Analysts, Financials): Market cap of $32.34B. Provides insurance, annuities, and employee benefit programs primarily in the United States, Japan, Latin America, the Asia Pacific, Europe, and the Middle East. Citi’s comment: “Strong market positions and brand awareness.” The stock has had a couple of great days, gaining 11.24% over the last week.
5. Texas Instruments Inc. (TXN, Earnings, Analysts, Financials): Market cap of $34.22B. Engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. Citi’s comment: “National Semi acquisition adds scale.” The stock has had a couple of great days, gaining 8.7% over the last week.
(By Rebecca Lipman. Citigroup comments sourced from Business Insider)
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