As the new year approaches, investors should keep an eye on some stocks that could outperform over the next 12 months, according to Citi. It has already been a strong year for stocks with all three major averages posting sizable gains. The tech-heavy Nasdaq Composite has seen the most of all, rising more than 33% year to date. That's followed by the broad market S&P 500 at more than 26%, and then the blue-chip Dow Jones Industrial Average at about 15% year to date.
In light of this backdrop, Citi updated its focus list of bottom-up, highest conviction ideas for North America. According to the firm, the list has delivered an absolute return of 26% during a three-month period and 37.5% return during a six-month period. Now looking to 2025, the firm updated its list with additions such as AT&T and Boston Scientific while removing some names such as Cheniere Energy and Atlassian. 'An early theme related to '25 is earnings growth rate convergence,' Citi U.S. equity strategist Scott Chronert said in a recent note to clients. 'This too plays to both broadening and stock selection with investors increasingly looking down cap for incremental alpha opportunities.' Here are the stocks that came up on the list. While newly added AT&T has ticked lower in December, shares have outperformed the broader market in 2024, posting year-to-date gains of almost 37%. Citi, which has a buy rating on the name, thinks shares can keep rising, as its price target of $28 implies about 22% upside potential from Thursday's close. Citi analyst Michael Rollins said the market is underappreciating AT&T's opportunity to sustain strong annual performance in its mobility segment and expand financial contributions within its consumer wireline segment. Additionally, he anticipates the company's service revenue growth will increase to 2.4% year over year and even sees more upside ahead when looking at fiscal 2026 and 2027