As we approach the end of the year, the stock market has exhibited a degree of turbulence that has left many investors feeling uneasy. Following a disappointing outlook on Federal Reserve rate cuts, significant downturns were observed across major indices. Notably, the Dow Jones Industrial Average faced a historic 10-day losing streak—a situation not seen since the mid-1970s. Despite these worrying trends, the investment firm Jefferies remains optimistic, asserting that there are several stocks poised for significant growth as we move into 2025.
In a recent analyst note, Jefferies updated its “Franchise Picks”—a carefully curated list of stocks deemed to have high potential for outperforming the market. These selections are described as “high-conviction, Buy-rated stocks,” meticulously chosen based on thorough analysis that considers catalysts for growth and appropriate valuation levels. Interestingly, Jefferies has included five new stocks in this updated list of Franchise Picks, demonstrating a strategic realignment based on current market dynamics.
Among the most notable additions is Caterpillar, a significant player in the construction and mining equipment space. This stock has gained nearly 25% so far this year and has been highlighted for its promising prospects. Jefferies analyst Stephen Volkmann has placed a price target of $475 on Caterpillar shares, suggesting an additional potential rise of about 32% from recent closes. Volkmann attributes this bullish stance to the company’s ties to both the infrastructure and commodity sectors—areas that have suffered from underinvestment over the past decade. With an anticipated peak in sales as the economy shifts, Caterpillar appears to be well-positioned for growth.
Flowserve, a manufacturer of flow control products, has also been added to Jefferies’ recommendations. Analyst Saree Boroditsky has cited increasing demand in the power sector as a motivating factor in her analysis. With a price target of $80—indicating a projected increase of 38%—the stock is seen as positioned to benefit from mid-teens earnings growth through 2027, supported by a recovery in key end markets and improvements in profit margins.
Another interesting pick from Jefferies is EPAM Systems, a firm specializing in software engineering and IT services. Although the stock has experienced a 16% decline in 2024, analyst Surinder Thind has set a price target of $305, foreseeing a rebound of approximately 24%. This projection hinges on a predicted increase in discretionary spending among clients as a result of growing macroeconomic confidence and advancements in cutting-edge technologies like generative AI. Moreover, Thind highlights that EPAM is actively expanding its workforce, further indicating operational growth.
The updated list from Jefferies also includes TransDigm Group, an aerospace components manufacturer, and Ventas, a real estate investment trust focused on healthcare facilities. Both stocks reflect the diversification in Jefferies’ selections, accommodating various sectors that showcase resilience and potential in fragmented markets.
Lastly, it’s essential to note the continual presence of industry heavyweights within the Franchise Picks. For example, Microsoft, part of the “Magnificent Seven,” remains a favored selection alongside innovative players such as DraftKings in the sports betting arena. These returning stocks serve as a testament to Jefferies’ commitment to robustness and reliability in stock selection.
While the current market landscape reveals challenges and uncertainties, Jefferies has adeptly identified several stocks that promise substantial upside potential for 2025. With their well-researched Franchise Picks, investors may find opportunities even amidst volatility. As always, careful consideration and strategic thinking will be crucial for any investor looking to navigate the complexities of the stock market in the upcoming year. Jefferies’ insight suggests that opportunities are indeed out there, ready to be harnessed by those willing to act.