RBC's Second Quarter Stock Picks

Despite predictions that stocks will be choppy in the next quarter, RBC Capital Markets has provided a list of high-conviction names to help investors navigate the uncertainty.

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There are still several macro overhangs in the market even though many investors believe the banking crisis is over. 

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A messy post-crisis normalization will characterize 2023 as a year of modest gains similar to 2002-2003 and 2010-2011, but there will be choppy conditions over the coming quarters. According to Graeme Pearson, global head of research, "Earnings forecasts have been cut, inflation has been bumpy, and there is uncertainty about the transition in Fed policy and the onset of a challenging economy." 

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This quarter, RBC has selected 10 stocks it believes to have a strong chance of offering upside over the next 12 months. They are:   

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• Alnylam Pharmaceuticals, Inc.

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• Boston Scientific Corporation

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• CrowdStrike Holdings, Inc.

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• Diamondback Energy, Inc.

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• Meta Platforms, Inc.

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• Mastercard Inc.

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• Palo Alto Networks, Inc.

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• HEICO Corporation

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• PG&E Corporation

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• S&P Global, Inc.

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RBC has added two new names to its list of high-conviction stocks, Alnylam Pharmaceuticals, and Boston Scientific. Over the past year, Alnylam shares have gained about 32%.

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As part of its expansion into treating transthyretin amyloidosis with cardiomyopathy, the company will develop Onpattro for treating transthyretin amyloidosis with cardiomyopathy. A decision on the drug is expected by Oct. 8, according to the Food and Drug Administration. Shares would rise further if the application is approved, the analyst said.

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Several upcoming device launches and trial data readouts are anticipated to generate double-digit EPS growth for Boston Scientific, said RBC analyst Shagun Singh. As of the end of December, shares are up 8.3%. 

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A top pick for the quarter was Diamondback Energy, an oil company.

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According to analyst Scott Hanold, the company has quality assets, strong economic growth, minerals ownership, and a water company, which together provide a competitive advantage. Shares are up over 3% in 2023. “We believe FANG has one of the lowest cost structures in the [Permian] Basin and a high cash flow break-even (including dividend).

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Stocks in the technology sector have had a good year in 2023, with the Technology Select Sector SPDR Fund (XLK) up nearly 19%. Meta shares have reached nearly 80%.

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According to analyst Brad Erickson, Meta is positioned to compound 15-20% earnings growth once it matures through its current investment cycle around artificial intelligence.

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