JP Morgan: These Are Our Top Tax Cut Stock Picks

The reform tax plan is gaining steam. In its current form, the plan would cut taxes for businesses by approximately $1 trillion. And JP Morgan has singled out the best stocks set to benefit from the proposed reforms.

“We think the most significant near-term upside catalyst for equities is still ahead – passage of the US Tax Bill. Our analysis indicates the market is significantly underestimating the probability of tax reform passage,” says JP Morgan derivatives strategist Shawn Quigg. He continues: “We think the potential passage of tax reform could provide 5 percent near-term upside to the S&P 500. However, the potential upside could be significantly higher for those high-tax stocks poised to outperform in a more tax-friendly regime.”

To find these top tax bets, the bank screened its index of tax-linked companies for stocks with robust options trading volume as well as low implied volatility. The bank calls the resulting stocks ‘The Top Tax Outperformers for Upside Call Buying’.

Here we zero in on the ‘Overweight’ rated stocks in the report. TipRanks reveals that out of these 5 stocks, 4 have a bullish ‘Strong Buy’ analyst consensus rating. We can also dig down further and see what the Street’s best-performing analysts have to say on these stocks.

Let’s take a closer look at these 4 ‘Strong Buy’ stocks now:

Concho Resources 

Texas-based Concho Resources (NYSE:CXO) is a leading petroleum and natural gas exploration and production company. CXO operates exclusively in the Permian Basin in west Texas and southeast New Mexico. RBC Capital’s Scott Hanold is also bullish on the stock. He says the 2018 set up is still strong and believes the stock can outperform its peer group over the next 12 months. “CXO has strong upside potential to production growth driven by an abundant inventory of potential drilling locations” writes Hanold. He upped up his price target by $6 to $164 last month.