When liquidations take place and profits are taken at the end of the year, investors sit on the newly minted cash waiting to be put to work again. Of all the investment trends in the market and all the stocks that could outperform, which stocks could pose the best opportunity between now and 2025? Well, there is an answer for that too, and it is found in the way traders prefer to use it at hedge funds and investment banks.
This method is often referred to as “top-down analysis,” where investors need to understand the world from a bird’s-eye view and then end up in specific industries and stocks loaded with tailwinds and momentum for the coming months or quarters. Understanding that the new US administration will be pro-business for local entities, focusing on the requirements of the new energy sector, business services sector, and transportation names, will be a winning perspective.
From this path down to the chosen industries, investors will find it easier to keep stocks as they are Exxon Mobil Company New York Stock Exchange: Gold and TRANSOCEAN LIMITED New York Stock Exchange: Reg Taking into account the potential new demand for oil. Hence, efficiency and high-margin services for companies that respond to more activity can lead to upsides Shopify company New York Stock Exchange: Shop And even Alphabet company Nasdaq:Google.
Finally, all raw materials and finished products that need to be transported will likely be recalled Old Dominion Freight Line Company NASDAQ:ODFL or XPO company New York Stock Exchange: Expo To accomplish this task.
Why might rising business activity push oil inventories to new highs soon?
As rising business activity continues to weigh on the US economy, oil demand will likely follow as a side effect. From manufacturing and warehousing to transportation and shipping, oil will play a crucial role in the country’s growing trends for domestic business activity.
Across the ocean today
(As of 12/13/2024 ET)
- 52 week range
- $3.83
▼
$6.88
- Price target
- $6.25
However, not all stocks are created equal; Companies higher up the value chain, such as Transocean, are set to get their money first because of their business model. When oil demand returns, pushing prices higher, equipment lessors like Transocean usually see the effects of new orders first, especially since production capacity is so limited at the moment.
This is why analysts want to push its price higher, specifically the analysts at Susquehanna, who maintained a positive rating on the stock while also setting a price target of $6.50 per share on Transocean. To meet those valuations, the stock would have to rise as much as 58.5% from where it trades today.
However, this massive upside comes with risk, namely its high beta of 2.7.
ExxonMobil today
(As of 12/13/2024 ET)
- 52 week range
- $95.77
▼
$126.34
- Dividend yield
- 3.57%
- P/E ratio
- 13.80
- Price target
- $129.84
Investors can still gain exposure to oil with a much lower beta of 0.9 through Exxon Mobil.
The company maintains a $140 price target from Morgan Stanley, which implies an upside of 24.8% from current levels. beyond that,
ExxonMobil’s integrated business model, strong cash flows, and history of consistent dividend payments may provide more stability and flexibility compared to more volatile players in the sector.
Shopify and Alphabet services pave the way for enhanced efficiency and growth
More demand for exports must be created to boost the local economy, especially manufacturing and others, and one way to do this is through a lower dollar. When this currency movement occurs, businesses will find themselves with higher inflation due to demand and a lower currency.
Shopify today
(As of 12/13/2024 ET)
- 52 week range
- $48.56
▼
$120.72
- P/E ratio
- 107.13
- Price target
- $99.03
However, this is good news for services like Shopify and Alphabet Inc., Google’s parent company, which can automate the hiring and customer management process cheaper and more efficiently.
Even if capacity remains limited and there is not enough time to move parts during high demand, many back-end processes can be automated here.
This is especially true if products start being shipped in and out of the country due to currency fluctuations, which is where Shopify can shine. Analysts at Loop Capital agree with this trend, boosting the stock from Hold to Buy as of December 2024, this time with a $140 price target as well, calling for a net upside of 24.4%.
Alphabet today
(As of 12/13/2024 ET)
- 52 week range
- $129.68
▼
$195.61
- Dividend yield
- 0.42%
- P/E ratio
- 25.18
- Price target
- $206.08
The same can be said for Alphabet stock, which has recently made breakthroughs in other areas with Google, such as quantum computing.
Although the price of this behemoth has risen by 45.7% over the past 12 months, analysts from Pivotal Research believe it could pay another 16.3%, judging from the $225 price target set as of October 2024.
Given Alphabet’s unparalleled reach in search, advertising and cloud services and its strides in cutting-edge fields like artificial intelligence and quantum computing, investors have plenty of reasons to remain optimistic.
Transportation stocks boost business activity recovery
Old Dominion Shipping Line today
Old Dominion Shipping Line
(As of 12/13/2024 at 05:35 PM ET)
- 52 week range
- $165.49
▼
$233.26
- Dividend yield
- 0.52%
- P/E ratio
- 35.09
- Price target
- $204.00
After 25 months of contraction Manufacturing PMI It may be poised for a meaningful rebound, putting trucking stocks like Old Dominion and XPO at the forefront of a potential industry recovery. These factors make it an attractive option to put some idle money to work.
As for Old Dominion, analysts at Stephens see it as an overweight stock at $240, which would be 17% higher than the stock’s trading price today. Old Dominion’s established reputation for operational efficiency, its extensive service network, and improving industry trends suggest that patient investors could be well positioned to capitalize on the next phase of the manufacturing cycle.
XPO Today
(As of 12/13/2024 ET)
- 52 week range
- $80.26
▼
$159.43
- P/E ratio
- 50.58
- Price target
- $147.31
For XPO, the trend continues. Analysts from Citigroup called it a buy from November 2024 and boosted their ratings from the previous $155 per share to $179.
For this new valuation to be true, XPO stock would have to see an appreciation of 14.3% from today’s price.
Given XPO’s well-established presence in the logistics and transportation sectors, coupled with ongoing supply chain improvements and growing demand for efficient shipping solutions, investors have multiple tailwinds that support the stock’s potential to achieve these ambitious goals.
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