As the fourth quarter gets underway, there are some stocks that may be poised to outperform over the next several months, according to Citi. September marked another positive month for stocks, with all three major averages finishing in the green, despite some tumultuous periods. The S & P 500 and the Nasdaq Composite are up more than 19% this year, and the Dow Jones Industrial Average is up more than 11%.
"Now, broadening is apparent, with Value leading while Growth has not yet achieved July levels," Scott Chronert said in a Friday note to clients. The investment bank's head of U.S.
equity strategy said expectations for a soft landing sentiment, tailwinds from AI investment and the upcoming presidential election could all serve as catalysts to move stocks higher. "Importantly, an early theme related to '25 is earnings growth rate convergence," he said. "In turn, while index level valuations appear full, we advocate shifting the focus to ongoing stock specific opportunities as we head into Q4.
" With this in mind, Citi updated its focus list for North America – a basket of bottom-up stock ideas with the highest conviction for the next 12 months. The firm added names such as Ally Financial , and removed others like Ideaya Biosciences and Alnylam Pharmaceuticals . Below are some names that made the list.
Citi views newly added Ally Financial as "one of the best-positioned liability sensitive names," seeing the potential for total book value growth of 25% by the fourth quarter o.