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Citi's Top Stocks: Low Volatility, High Returns Ahead
24 Dec
Summary
- Citi analysts identified stocks with superior risk-adjusted returns.
- Selected stocks show improving margins and asset turnover.
- Key picks include Cboe, Micron, and First Solar for future gains.
Citi analysts, led by Drew Pettit, have identified a basket of large-cap stocks with the potential for significant returns and reduced volatility in the coming year. These companies, including Cboe Global Markets, Micron Technology, and First Solar, exhibit a superior Sharpe ratio, reflecting strong risk-adjusted performance that has remained consistent despite global economic shifts.
The selection criteria focused on S&P 500 constituents expected to improve net profit margins and asset turnover, while decreasing financial leverage over the next two years. Citi believes these "Good ROE" stocks are trading at a discount compared to those with weaker returns, especially with anticipated margin expansion and revenue acceleration.
Each stock in the basket has recent positive analyst ratings: Cboe Global Markets, up 30% this year, received an overweight upgrade from Barclays for its attractive valuation and strategic focus. Micron Technology, surging 228% this year, was upgraded by Bank of America due to a durable memory cycle and strong balance sheet. First Solar, up 52% this year, was highlighted by Mizuho for its market leadership in the non-China solar sector and robust future cash flow growth.
