With volatility on the rise and so many different factors for investors to ponder as the year winds down, it might seem like a daunting task trying to find stocks that are worth adding for 2022. That's why it makes sense to look at the Goldman Sachs} } conviction buy list for ideas, as the esteemed bank's research team can help provide you with some extra confidence in a challenging market environment.
This list represents investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return. This significant investment bank's reputation speaks for itself, and there are quite a few standout names on Goldman's buy list that could be poised for outperformance in 2022 and beyond.
Although investors shouldn't add shares of a company just because of an analyst recommendation, many of these businesses have many additional reasons that make them worth a look at this time. Keep reading below for an overview of 3 stocks on the Goldman Sachs conviction list to buy now.
1. UnitedHealth Group
First up is UnitedHealth Group (NYSE:UNH), a stock that Goldman Sachs added to its conviction buy list thanks to a positive outlook for the managed care space. It's easy to recognize why this company is a solid pick, as United Healthcare offers many customers health plans, healthcare delivery, and optimization services.
The company operates in two business segments, UnitedHealthcare, which provides healthcare benefits, and Optum, which focuses on health care delivery, services, and optimization.
United Healthcare reported record Q3 revenue of $72.3 billion, which was up 11% year-over-year and an explicit confirmation that it's a business with plenty of momentum heading into next year. Optum is a particularly intriguing part of the company, as UnitedHealth is seeing growth in all three of its businesses, including OptumHealth, OptumInsight, and OptumRx.
There's also a lot to like about UnitedHealth's $8 billion acquisition of health care technology firm Change Healthcare (NASDAQ:CHNG), which should immediately improve Optum's growth prospects and technological capabilities. While shares have been on quite the run over the last few weeks, it's still a great option to consider adding on pullbacks.
2. American International Group
Another insurance giant on Goldman Sachs conviction buy list to consider adding heading into 2022 is American International Group (NYSE:AIG). It's one of the most comprehensive insurance and financial services companies globally. It provides a range of property-casualty insurance, life insurance, retirement solutions, and more to customers worldwide.
While the company nearly collapsed back in the financial crisis, American International Group seems to have moved past this dark period and should have brighter days ahead for investors. Notably, investors should be attracted to the company's recent cost-cutting initiatives and growth opportunities, given the demand and pricing for risk transfer services following the pandemic.
In Q3, AIG's general insurance net premiums written grew 11% thanks to strong commercial lines growth. The company also saw its Q3 net income come in at $1.7 billion, an increase of over 500% year-over-year.
As we alluded to earlier, AIG plans to take out $1 billion in costs by 2022, which should lead to even stronger quarters ahead for the commercial and consumer insurance giant. Finally, a 2.35% dividend yield makes this stock all the more attractive in an economic environment where inflation runs rampant.
3. Valvoline
If you've ever gotten an oil change before, there's a good chance that Valvoline's (NYSE:VVV) products made their way into your engine. Valvoline manufactures and markets automotive and industrial lubricants and operates in Retail Services and Global Products.
Retail Services is all about the company-owned and franchised Valvoline Instant Oil Change stores and Express Care, and the former is the second-largest U.S. retail quick lube service chain. Global Products is focused on the sales of preventative maintenance products for vehicles and should be in for excellent long-term growth given how newer auto engines require premium lubricants to function.
This is a stock that could be undervalued heading into 2022, as the company's same-store sales growth has been improving dramatically in recent quarters. In FY 2021, Valvoline's retail services system-wide same-store sales jumped by 21.2% and were a significant contributor to the company's net income increase of 32% to $420 million.
Goldman Sachs recently upgraded the stock to its conviction buy list and adjusted its price target to $53 from $45, implying plenty of room for the stock to rally in the coming months.