We thought our readers might like to see some high conviction stock buys from top ranking sell-side analysts. All of the following seven picks are rated a “strong buy” by top ranked analysts and have price targets 20% or more above the current price. The picks come from a wide variety of sectors and include: Turtle Beach (HEAR), Alibaba (BABA), Cigna Corp (CI), Marathon Petroleum (MPC), Amarin Corp (AMRN), and Teladoc Health (TDOC).
FINSUM: These are diverse picks both in terms of geography and sector. Amarin and Alibaba are the most interesting for us. The former because of buyout rumors by Pfizer, and the latter because of its strong growth characteristics.
Looking for the best big tech stock to buy? Look no further than Google. Alphabet, the parent company of Google, is a better deal than it seems on paper right now. Yes, it is trading for 24x forward earnings, a 50% premium to the S&P, but it has some very strong redeeming qualities. Get this—revenue growth at Google has raged from 21% to 25% per quarter for the last 14 quarters. Further, the important thing about that valuation metric above is that it does not include Google’s massive $105 bn in cash. If you strip that out, along with the loss from its “moonshots” division, and Alphabet is trading at 19x earnings—not bad for a company with that kind of growth! The stock has been beat up lately because of significantly higher spending, which has hurt margins.
FINSUM: Okay, so margins are down a bit, but the c-suite says they are investing for the future. We think this may present a good buying opportunity. We never thought we’d be talking about a FAANG as a value stock!
Value stocks have been in a slump for a decade, with growth consistently outperforming. That acknowledged, there is still something to be said for buying beaten up stocks, which seem to have less downside than highly valued growth names. But how to do it? Try an old stock picker’s favorite: buy the ten stocks with the highest dividend yields in the Dow, a strategy which has historically performed well and is called the “Dogs of the Dow”. These stocks tend to have great dividend yields, and generally outperform the index as a whole. The bottom ten right now are: Verizon, IBM, Pfizer, Chevron, Exxon-Mobil, Merck, Coca-Cola, Cisco, Procter & Gamble, and JP Morgan.
FINSUM: This sounds like a solid bet, though because of the group, you are buying them with no real catalyst.
Amazon has had two rough patches following its last two earnings releases. The stock fell in October after its third quarter earnings release, and again last week after its fourth quarter numbers. December as a whole was a rough patch too. However, all this presents a good buying opportunity, says one equity research analyst. “Amazon typically experiences some downside follow-through over the day and week after a move lower on earnings, but over the next one and three months, these moves lower have presented very good buying opportunities”, says the analyst, from Bespoke Investment Group.
FINSUM: This is not arguing that Amazon is suddenly some kind of value stock, but if you are thinking of going long anyway, the current environment may represent a good buying opportunity.
It has been a long time since value stocks have performed well. For about a decade, growth stocks have handily outperformed growth. However, the stage may be set for a long awaited rebound in value shares. One thing that may help is that shares fell so much to end the year, which has put many even strong companies in significantly discounted positions. The sign that may show it is time for value to shine is that the valuation gap between the market’s most expensive and cheapest stocks has reached its highest since 2008. This is a good indicator that value stocks are likely to rise.
FINSUM: Many analysts have been calling for a resurgence of value stocks for years and it has not happened. That skepticism aside, we do feel more positive about the possibility this time around.