Your Best Trading Year Starts Here: Top 3 Stocks for 2025 Gains

Key Points

• Going into 2025, investors should keep these stocks and industries in mind to make 2025 their best investment year so far.
• Wall Street analysts agree with this theme, as the fundamental story checks out, seeing double-digit upside from here. 
• Institutional buyers are also getting behind these trends in the coming months as their purchases have increased recently.

When it comes to getting the new year 2025 on the right track, investors might be wondering where the best place for their capital is. While some may advise holding cryptocurrencies or a mix of cash and bonds, this view is often too open-ended and vague to get investors where they need to be by the end of the first quarter of 2025.

With this in mind, a more specific list of stocks could be more useful, one that is derived from actual fundamental trends and data, so that the odds swing in their portfolios’ favor in the coming months. After breaking through the Goldman Sachs 2025 outlook report, it becomes clear that the near-term fundamentals favor a few specific names and industries.

Overseas stocks might benefit from the potential dollar decline, and that’s where names like Alibaba Group NYSE: BABA come into play, not only for retail investors but also for mega investors. Then, domestic defensive names in the consumer staples sector could greatly benefit from an economic swing, such as discounted shares of PepsiCo. NASDAQ: PEP, or net exporters in the manufacturing sector like Caterpillar Inc. NYSE: CAT.

Alibaba Stock’s Double-Digit Upside: A Must-Have

When it comes to overseas stocks, China seems to be the most beaten down market despite its bullish fundamentals in credit markets and recent government stimulus measures. This should signal to investors that discounts in Chinese stocks are driven more by fear than factual trends.

And that’s where value investors really get excited, such as David Tepper and Michael Burry, who have made Alibaba stock their largest portfolio position over the past few quarters. This level of conviction and concentration should signal investors of potential opportunities for themselves in the stock, of which there are plenty.

Not only is the entry today, at 72% of its 52-week high, attractive enough, but Wall Street analysts think that the fair valuation for Alibaba stock should be a lot higher than where it is today. Particularly, those from Macquarie decided to reiterate their outperform rating on Alibaba stock, this time along with a $145 a share valuation.

This rating, which was placed on October 2024, has not changed despite the stock’s volatility regime upward since then. That means investors can still expect a net upside of as much as 72% from today’s stock price.

Pepsi’s Discount Won’t Last Long From Here

The thing about large-cap stocks, defensive ones especially, is that they carry low betas. This means that they are not as exposed to downside moves in the market and, therefore, offer more protection to investors so the fact that Pepsi stock is trading at 78% of its 52-week high makes it a rare occasion for value investors to take advantage of.

Usually, Wall Street analysts refrain from keeping a bullish outlook on stocks that trade this low, as their reputation might be affected by recommending a stock with recently bearish momentum. However, Pepsi’s positioning in the beverage industry is so strong that it only made sense to take this “low-hanging fruit.”

While the MarketBeat analyst consensus rating is at a Hold, those at Deutsche Bank led the way by keeping a Buy rating on Pepsi stock as recently as December 2024, though this time boosting their price targets to $184 a share. To prove this new valuation right, these analysts directly imply that Pepsi stock has up to 26.5% room to move higher from where it is today.

More than that, there are those from the institutional side who have decided to take matters into their own hands as well, such as those from Geode Capital Management. This firm boosted its holdings in Pepsi stock by 1.8% over the last quarter, bringing its net position to a high of $5.2 billion, or 2.2% ownership in the company.

Net Exporters Could Soar, That Includes Caterpillar

In that 2025 report, the implications were made clear that manufacturing stocks that export more than they sell domestically will likely do well. With a significant international presence, Caterpillar could potentially be an excellent buy in the coming months.

In fact, analysts at Truist Financial decided to end the year with a bang. They reiterated their Buy rating on Caterpillar stock and boosted their valuations handsomely. Where they previously valued the stock at $454 a share, they felt comfortable boosting their targets up to $471 a share, calling for a net upside of 29.6%. 

But the optimism for this stock doesn’t end here. Even bearish traders decided to ditch their short positions over the past month in the face of this new Goldman Sachs view. Investors can see this theme in the 2.5% decline in short interest in Caterpillar stock during the period, signaling bearish capitulation and reiterating the bullish themes for 2025.

However, it’s worth noting that the MarketBeat consensus rating for Caterpillar is a Hold, which reflects a balanced view among analysts. This suggests that while some are cautious, there is still significant potential for upside, especially given recent upgrades and declining short interest. Investors may find this an opportune time to consider Caterpillar as a strong contender for 2025 growth.