Investing.com — Jefferies revealed the latest update to its Franchise Picks list, adding five new high-conviction stocks: The worm (NYSE:), EPAM Systems, Flowserve (NYSE:), TransDigm Group, and Ventas (NYSE:).
These stocks join 17 others on the list designed to represent Jefferies' strong Buy views, supported by catalysts and fair value.
Worm: Jefferies highlights CAT's exposure to the infrastructure and commodities industries, both of which have benefited from a decade of underinvestment.
Firm projects sales at the peak of the next round could reach $70 billion. With CAT trading at a 15x EV/EBITDA multiple, far below its large-cap peers Deere & Co (NYSE: ). (23x), Jefferies estimates a potential upside of 40%, targeting $560 per share.
EPAM processes: With IT services clients expected to increase spending through 2025, Jefferies notes EPAM's recent moves to expand its workforce and make strategic acquisitions, showing confidence in its growth.
The firm sees mid-single-digit growth potential as EPAM trades near the low end of its long-term P/E (17-35x).
Flowserve: According to Jefferies, FLS is positioned to benefit from strong demand in the oil and gas, power, and pipeline markets, and is expected to deliver EPS growth in the mid-teens by 2027.
Jefferies estimated about 5% annual organic growth and 350 basis points of margin expansion, which could drive the value of multiple growth.
TransDigm Team: Aging aircraft fleets and OEM capacity constraints are said to bode well for TDG's aerospace business.
Despite the negative opinion about its exposure to defenses, Jefferies believes that the potential stress is overstated and sees significant upside.
Advertisement: With improved residential occupancy rates, Jefferies expects same-store NOI growth of 7%+ annually.
The investment bank believes that the transition to the high-end real estate platform (SHOP) is the VTR model to close the valuation gap with peers.