Investment bank Jefferies has revealed its top stock picks that are exposed to major themes like innovation, new products, and emerging markets. The table below highlights five of its “Top Picks” with the biggest upside potential. Prudential Jefferies said Prudential , a U.K.-listed life insurance provider focused on Asia, has seen its sales bounce back strongly, with annual premiums up 40% in the first nine months of 2023 compared to 2019 pre-pandemic levels. The bank’s analysts believe Prudential will continue gaining market share amid economic uncertainty in mainland China. Meanwhile, Prudential’s new chief executive, Anil Wadhwani, has said the company will diversify its future business towards India and Africa after it was hit hard by Beijing’s zero-Covid policy. The investment bank forecasts Prudential shares will rise 118% to 18,000 British pence over the next 12 months. U.K. shares are generally priced in pence, with 100 pence equal to one British pound ($1.27). Alibaba Chinese e-commerce giant Alibaba is in Jefferies’ latest “Global Best Ideas” list. The company recently unveiled organizational changes under new group CEO Eddie Wu. In a note to clients on Jan. 30, Jefferies analysts said that with Wu taking over leadership of Alibaba’s Tmall and Taobao platforms, the Chinese firm would “unlock synergies and drive AI innovation.” The investment bank expects Hong Kong-listed shares of Alibaba to rise to 128 Hong Kong dollars ($17), which implies an 84% upside potential. The bank expects the U.S. listed stock to rise to $133 a share, 85% above the current share price. HSBC Jefferies analyst Joe Dickerson believes HSBC shares can re-rate higher from current low valuations of 0.9 times tangible book value. The analyst sees HSBC sustaining 15-16% returns on tangible equity in 2024-2025, with significant capital returns to shareholders. According to Dickerson, the pending sale of HSBC’s Canadian business also paves the way for special dividends. Jefferies estimates HSBC’s total shareholder payouts will reach $54 billion by the end of 2025, funded through earnings power. The investment bank expects shares to rise 57% over the next 12 months. ASML Semiconductor equipment manufacturer ASML is also a Jefferies “top pick”. The bank sees a cyclical recovery underway in the memory and chip sector, with ASML’s revenues accelerating by 25% in 2025. Jefferies believes concerns about U.S. export restrictions on China sales are overblown. The investment bank believes ASML’s current valuation of 33 times forward earnings is too low since it forecasts 49% earnings growth over the next two years. DexCom Shares of medical device maker DexCom are expected to rise by 33% over the next 12 months, according to Jefferies. The bank’s analysts cited DexCom’s expanding total market potential in diabetes care as part of their reasoning for their bullish stance on the stock, dismissing concerns around the impact of the growth of anti-obesity drugs. “The diabetes market remains large and underpenetrated. The denominator is so big (and growing) that even some improvement in disease progression from [the anti-obesity drugs] therapy is unlikely to crimp the opportunity ahead for [continuous glucose monitoring devices], it could even be a tailwind,” the bank said in a note to clients. — CNBC’s Michael Bloom contributed reporting.
