Goldman Identifies the Most Profitable Stocks for 2017 (AVGO, CMG)

Goldman Sachs (GS) predicts that a combination of higher wages, rising interest rates and inflation will weigh on the profitability of U.S. companies this year and next.

In a first quarter earnings preview research note, the investment bank argued that only an unexpected sales boost, triggered by a continuation of impressive economic growth, can potentially stop profit margins and earnings per share from sliding in 2017. The sectors it reckons will struggle most are consumer discretionary and industrials, because both are more sensitive to wage increases

21 Exceptions

Against this difficult backdrop, Goldman identified 21 companies that it believes are best equipped to increase profit margins by at least 50 basis points during 2017 and 2018.

Eight of the stocks that Goldman is most bullish on are in the information technology sector. Topping the list for 2017 is Broadcom (AVGO) which has become one of the most profitable semiconductor companies in the world since merging with Avago back in in 2016.

Source: Goldman Sachs Global Investment Research.

Broadcom’s leading status in high-growth technology markets, including wired and wireless network tools, data storage controllers, and automotive computing, helped the company beat analyst expectations in the first quarter of 2017. Goldman forecasts continued robust demand to lift its already high operating profit margin by a further 493 basis points over the rest of the year. (See also: Previewing AVGO Quarterly Results.)

Chipotle Mexican Grill (CMG is forecast to have the second-best year for profit margin growth. After multiple foodborne-illness scares in 2015, the restaurant chain is now believed to be in a strong position, thanks to a combination of better management and surging consumer demand for healthier food choices.

In third place came Applied Materials (AMAT) . Also read: https://goo.gl/eNwbsR

Like Broadcom, the maker of semiconductor chips for smartphones, televisions and solar products has carved out a dominant position in the markets it serves. After years of heavy investment in research and development, Applied Materials is now able to provide much better equipment design experience than competitors Lam Research (LRCX)
and ASML (ASML)

 (See also: Strong Fundamentals Support Applied Materials Breakout.)


Other companies on Goldman’s list include: FLIR Systems (FLIR) Zoetis (ZTS) Qorvo (QRVO)

FLIR Systems Inc

FLIR

35.57

+0.06%

 Vulcan Materials (VMC) NVIDIA (NVDA) Netflix (NFLX)  and Symantec (SYMC)

Qorvo Inc

QRVO

69.38

-1.78%

Vulcan Materials Co (Holding Co)

VMC

119.90

-1.19%

NVIDIA Corp

NVDA

97.68

-0.09%

 Source: https://goo.gl/a2VbA1