Investing.com — Jefferies has unveiled the latest update to its Franchise Picks list, adding five new high-conviction stocks: Caterpillar (NYSE:CAT), EPAM Systems, Flowserve (NYSE:FLS), TransDigm Group, and Ventas (NYSE:VTR).
These stocks join 17 others on a list designed to represent Jefferies’ strongest Buy-rated ideas, underpinned by catalysts and favorable valuations.
Caterpillar: Jefferies highlights CAT’s exposure to infrastructure and commodity industries, both of which are benefitting from over a decade of underinvestment.
The firm projects peak sales in the next cycle could reach $70 billion. With CAT trading at a 15x EV/EBITDA multiple, far below its large-cap peer Deere & Co (NYSE:DE). (23x), Jefferies estimates a potential upside of over 40%, targeting $560 per share.
EPAM Systems: With IT services clients expected to increase discretionary spending in 2025, Jefferies notes EPAM’s recent moves to expand its workforce and make strategic acquisitions, signaling confidence in its growth prospects.
The firm sees the potential for mid-single-digit growth as EPAM trades near the lower end of its long-term P/E range (17-35x).
Flowserve: According to Jefferies, FLS is positioned to benefit from strong demand in oil and gas, power, and pipeline markets, and is expected to deliver mid-teens EPS growth through 2027.
Jefferies forecasts over 5% annual organic growth and a 350 basis point margin expansion, which could drive valuation multiple growth.
TransDigm Group: Aging aircraft fleets and OEM capacity constraints are said to bode well for TDG’s aftermarket aerospace business.
Despite negative sentiment around its defense exposure, Jefferies believes potential margin compression is overblown and sees significant upside.
Ventas: With improving occupancy rates in senior housing, Jefferies expects same-store NOI growth of 7%+ annually.
The investment bank believes the transition to the senior housing operating platform (SHOP) model positions VTR to close its valuation gap with peers.
