It’s now the end of the investing year. As is customary, the biggest investment banks in the industry are starting to come out and issue their views for 2025. It is sort of the Super Bowl for the finance sector, where economists, strategists, and even quants come together to put forth the best ideas for the market so that 12 months from now, they may claim fame if they are right or go into hiding for a few months if they’re wrong.
Today, those at the UBS Group released their 2025 best strategies and industries to invest in. However, that’s only half the job; investors then need to personally break down why these industries and sectors were chosen and, more importantly, which stocks to pick from the pack and achieve market-beating returns.
Investors will see just why Alphabet Inc. (NASDAQ: GOOGL) and Amazon.com Inc. (NASDAQ: AMZN) are some of the best picks from the recommended technology sector. Then, when it comes to the industrial stocks to do well in 2025, a diversified play through the Industrial Select Sector SPDR Fund (NYSEARCA: XLI) and Caterpillar Inc. (NYSE: CAT). Finally, two financial stocks, Goldman Sachs Group Inc. (NYSE: GS) and J.P. Morgan Chase & Co. (NYSE: JPM), have become top picks.
Why Watch Big Tech Names?
It’s pretty straightforward, really. Both Google and Amazon are at the forefront of the necessities that will likely pop up in the United States economy, especially as new potential trade tariffs bring on a new business cycle. Businesses facing new challenges and demand cycles will call on Google’s cloud services to retain margins and efficiency.
The same can be said about Amazon Web Services (AWS), not to mention the logistics and e-commerce segment, which could also heat up during a changing business and consumer environment. There is also the race for artificial intelligence, or what is now becoming the next hot topic in technology: quantum computing.
After releasing Willow, its first quantum computer, Google made it clear to the rest of the market that it wanted to establish itself as the leading authority in this space.
From this development, analysts at Pivotal Research decided to reiterate their Buy rating on Google stock as of October 2024, alongside a net upside of 16.5% through their $225 price targets.
Then, there’s the fact that Amazon's AWS and other cloud services will allow the stock to reach new highs in the coming quarters.
As of December 2024, analysts at TD Cowen not only kept a Buy rating on Amazon stock but also boosted its price tag to $265 a share, calling for up to 15.8% upside from where the stock is today.
Investing in Industrial Stocks: Broad vs. Targeted Exposure
After a 25-month contraction in the manufacturing PMI, some investors might safely assume that these stocks will be prime breakouts when new business activity calls for domestic transport, construction, and manufacturing names to come back online.
This is why keeping a broader exposure to the space through this Industrial sector ETF is efficient, but for those willing to go one layer deeper, here’s another worthy selection. If domestic business activity picks up, the construction sector will be right there to break out within this same tailwind, so keeping an eye on Caterpillar is a smart move today.
Analysts at J.P. Morgan Chase made this very clear, placing an Overweight rating on Caterpillar stock alongside a $515 per share price target to call for up to 35% upside in this stock from today’s price. Even bearish traders know this, so investors will notice a 9% decline in short interest for Caterpillar stock over the past month alone.
More than that, up to $8 billion of institutional capital has entered Caterpillar stock over the past 12 months, giving investors another bullish gauge to consider when analyzing this stock further.
Better Business and Dealmaking Could Push These Banks
What do Goldman Sachs and J.P. Morgan Chase have in common? They do very well when the market and the economy are strong. More dealmaking activity takes place during easier monetary conditions and when stock markets reach as high a valuation as they have reached today, as judged by the S&P 500.
This is the bread and butter of investment bankers, where the fees will reign in and make bottom-line earnings per share (EPS) look bigger in 12 months than they are today. This is why Wall Street analysts expect Goldman Sachs to post up to $9.6 EPS next year, up by as much as 14.3% from today’s $8.4, which is not an easy feat for this banking behemoth.
The same trend can be spotted in J.P. Morgan’s projections. The third quarter of 2024 delivered a massive earnings beat of $4.37 a share, while everyone expected to see a touch under $4.0. From these earnings perspectives, analysts from Piper Sandler have placed a price tag of up to $275 a share on J.P. Morgan stock, calling for a 14% upside from today’s level.
The same thing can be said about Goldman Sachs stock. Analysts at Keefe, Bruyette & Woods see the bank going to a high of $686 a share on their Overweight ratings as of December 2024, implying there is room for a rally of up to 16% to break today’s rally even higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
