Jefferies has caught the eye of Goldman Sachs. The investment bank has long-term growth tailwinds and is a pure play on a capital market recovery, according to Goldman. That prompted Goldman to place Jefferies on its conviction list, a group of buy-rated stocks from the firm’s global investment research department for the Americas. Here’s the full list — which analyst Steven Kron wrote should not be viewed as a portfolio that can be weighed or used to ensure diversification — as of its most recent update on Tuesday: Kron said that Jefferies’ investment in talent is underappreciated as its ability to drive market share gains. A recovery in equity capital markets already underway should help the stock given Jefferies’ strength in trading. Meanwhile, Kron said Jefferies’ partnership with Sumitomo will allow it to act as a full-service investment bank that can participate in the largest merger-and-acquisition deals that require financing. The partnership will also enlarge Jefferies’ balance sheet at a time when large U.S. banks are pulling back “due to rising regulatory capital and liquidity requirementsand pressure on funding costs.” “We think these structural and cyclical drivers, plus a potential positive upside catalyst from monetization of the last two remaining stakes, and a strong dividend, should drive upside to JEF’s shares,” Kron said. Taken together, Kron said to expect 27% revenue growth in 2024, which would exceed what is forecast for the average peer. He said Jefferies is currently at a compelling valuation, in just the 20th percentile of its relative price-to-earnings multiple over the past six years. Jefferies has underperformed the broader market this year, rising 5.8%. Half of analysts rate the stock a buy, with an average price target implying shares could climb 5.4% in the next year, according to LSEG, formerly known as Refinitiv. The addition wasn’t the only change on Tuesday: Kron also removed Macy’s , the department store retailer whose shares have tumbled 42% this year. Macy’s came off the list after Goldman analyst Brooke Roach lowered her price target by 26% following the retailer’s fiscal second quarter earnings. While Macy’s exceeded revenue and earnings expectations in the quarter, she noted a weaker credit card revenue environment, higher delinquencies and management guidance for slow asset monetization as cause for concern. M YTD mountain Macy’s stock in 2023 Macy’s joins Spirit Aerosystems and Tanger Factory Outlet Center , both of which were removed in August from what Goldman calls the “Director’s Cut” conviction list. — CNBC’s Michael Bloom contributed to this report
