Goldman Sachs Unveils Fresh “Conviction List,” Highlighting 3 Stocks with Over 40% Upside Potential

Goldman Sachs has released its updated “Conviction List – Directors’ Cut” for December, featuring a curated selection of buy-rated stocks with high risk-adjusted returns. This active list, compiled by regional subcommittees collaborating with sector analysts, showcases promising companies with differentiated views and strong conviction. The updated list includes some exciting additions, notably three stocks projected to see over 40% upside potential within the next 12 months: **Novonesis**, a Danish biotechnology company; **Kawasaki Heavy Industries**, a Japanese conglomerate; and **PetroChina**, a major Chinese oil and gas giant. Several companies were also removed from the previous list, highlighting the dynamic nature of the investment bank’s assessment and the constantly shifting landscape of the global stock market.

Key Takeaways: Goldman Sachs’ December Conviction List

• Goldman Sachs’ updated “Conviction List – Directors’ Cut” features three stocks predicted to achieve over 40% upside potential in the next year.
• **Novonesis (NVZMY)**, a Danish biotechnology company, is highlighted for its strong market position, R&D investments, and expected sales growth driven by bio-based alternatives.
• **Kawasaki Heavy Industries (KWHIY)**, a Japanese industrial conglomerate, benefits from its significant exposure to the growing aerospace and defense sectors and an undervalued share price relative to its peers.
• **PetroChina** stands out for its substantial gas production, positioning it to reap the rewards of increased cash flow and dividend yields alongside resilient performance against fluctuating oil prices.
• The list showcases Goldman Sachs’ active approach and demonstrates a willingness to re-evaluate companies based on changing market conditions and investment prospects.

Novonesis: A Biotech Leader Poised for Growth

Danish biotechnology firm **Novonesis (NVZMY)**, also known as Novozymes, has earned a spot on Goldman Sachs’ coveted list. The investment bank cites several compelling reasons for its bullish outlook, emphasizing the company’s **leading market share in enzymes and cultures**, along with substantial **R&D spending** far exceeding its competitors. Goldman Sachs’ analyst, Georgina Fraser, points towards several “**structural demand tailwinds**, including a growing focus on **sustainability, health & wellness**,” as key drivers of the company’s anticipated growth.

Growth Projections and Valuation

Fraser anticipates a doubling of **organic sales growth** leading to a projected **25% increase in earnings per share (EPS)**. This optimistic forecast stems from several factors including the **substitution of traditional petrochemicals with bio-based alternatives**, **expansions into new markets**, and strategic **applications in high growth areas**. While trading at a forward price-to-earnings ratio (P/E) of 24 times for 2026—a slight discount to its peers’ 25 times—Goldman Sachs believes Novonesis’ growth potential justifies its valuation. The investment bank set a target price of **586 Danish krone ($82)**, representing an approximate **42% upside potential** from the current market price. Novonesis’ shares are listed on Nasdaq Copenhagen and trade as an American Depositary Receipt (ADR) in the U.S.

Kawasaki Heavy Industries: Riding the Aerospace and Defense Wave

In the Asian market, **Kawasaki Heavy Industries (KWHIY)**, a major player in motorcycles, aerospace, and defense, has secured a place on Goldman Sachs’ list. The investment bank highlights KHI’s position as one of Japan’s top three heavy industry companies by revenue. Analyst Yuichiro Isayama notes that KHI’s contribution to profit growth from its **aerospace/defense business is comparable to peers** Mitsubishi Heavy Industries and IHI Corporation.

Undervalued Potential in Aerospace and Defense

Despite this comparable performance, Isayama emphasizes that KHI’s share price has significantly underperformed its peers, lagging by 80% to 100% year-to-date. He views this **considerable undervaluation** as a compelling investment opportunity. The analyst believes that KHI’s considerable exposure to the **aerospace/defense sector**, coupled with the **Japanese government’s renewed defense guidelines**, points towards “**strong prospects for steady growth in absolute profits and wider margins**” in both its **aerospace systems and defense business**, including its energy solutions and marine engineering operations. Goldman Sachs has set a target price of **8,000 Japanese yen ($53)**, implying a substantial **43.2% upside** for investors.

PetroChina: An “Underappreciated Gas Story”

Goldman Sachs is also betting on **PetroChina**, a major Chinese oil and gas giant, describing it as an “**underappreciated gas story**.” Analyst Nikhil Bhandari asserts that PetroChina is well-positioned to benefit from a continued year of **strong cash flow** due to its significant exposure to **upstream gas production**.

Gas Dominance and Resilient Earnings

Bhandari predicts that **gas production could account for approximately 50% of PetroChina’s upstream production volume by 2025.** This significant increase in gas volumes will result in upstream gas earnings accounting for a significantly **higher share than oil in its 2025 Exploration & Production (E&P) segment income.** This shift will enhance **earnings resilience against fluctuations in global oil prices**, making PetroChina a more stable investment despite the inherent volatility of the oil market. The analyst anticipates a robust **free cash flow yield of around 15% and a dividend yield of 8% for PetroChina by 2025**. Goldman Sachs has set a target price of **8.1 Hong Kong dollars ($1.04)**, representing approximately **47% upside potential**. PetroChina’s shares are listed on the Hong Kong and Shanghai Stock Exchanges, and it also trades on various ETFs.

Implications and Further Considerations

Goldman Sachs’ updated “Conviction List” reflects the investment bank’s ongoing assessment of global market trends and individual company performance. The inclusion of companies across various sectors and geographies underscores the bank’s diversified investment strategy. While the projected upside potentials are compelling, investors should perform their own due diligence and consider their individual risk tolerance before making any investment decisions. This list represents only one perspective among many and is not a guaranteed indicator of future performance.

The removal of companies from the previous list, including notable names like Xero and Lenovo, highlights the dynamic nature of Goldman Sachs’ investment strategy and the ever-changing landscape of global financial markets. Investors should always maintain vigilance and conduct rigorous research before investing in any stock.