A new month is here, so what better time to look at some new additions to your portfolio?
If you're on the lookout for some ASX 200 stocks to buy, then it could be worth listening to what Goldman Sachs is recommending.
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Which ASX 200 stocks is Goldman recommending?
Goldman believes that investors should be buying Lifestyle Communities Ltd (ASX: LIC) shares.
It is a developer, owner and manager of affordable independent living residential land lease communities. At the last count, the company had 28 residential land lease communities under contract, in planning, in development, or under management.
Goldman recently reiterated its conviction buy rating and $27.95 price target on its shares. This implies potential upside of approximately 93% from current levels. The broker said:
The long-term outlook for LIC is very positive — we believe outperformance of the stock will be driven by: (1) a step up in the pace of land acquisitions, with industry build rates below demand from an ageing population; (2) structural growth in demand for land lease as the sector increases its penetration among retirees; (3) fundamental valuation support for cap rates. In our view, the next step for LIC is to expand its development pace to three communities p.a., which we believe will be a key catalyst for the stock, and we see LIC as well capitalised to fund a faster development pace through its capital recycling model. With LIC offering the highest 3-year AFFO CAGR relative to peers on at a slightly above median P/AFFO multiple, we remain Buy-rated (on CL).
Anything else?
Another ASX 200 stock that Goldman has on its conviction list is mining giant Rio Tinto Ltd (ASX: RIO).
The broker currently has a conviction buy rating and $136.10 price target on its shares. This implies potential upside of over 19% from current levels. There's also a healthy dividend yield of 6%+ expected in FY 2024.
Goldman believes the company is well-placed to grow its production and sees a lot of value in its shares at current levels. Particularly given Rio Tinto's free cash flow generation and big yield. It explains:
We are Buy rated (on CL) on RIO due to: (1) compelling relative valuation vs. peers, (2) Strong FCF and dividend yield with our bullish view on iron ore, aluminium and copper prices, (3) Strong production growth in 2023 & 2024, (4) Pilbara turnaround (~50% of group NAV), (5) Compelling high margin low emission aluminium exposure.
