Autumn is usually tough on Wall Street.
The Oppenheimer analyst team recently put together their monthly list of top stocks to own over the next 12 months. The list may be of particular interest for investors in September, which has historically been the worst month for U.S. stocks. In the past 100 years, September is the only month of the year in which the Dow Jones industrial average has produced an overall negative return. Oppenheimer equity analysts each contributed a top stock idea to the report. Here’s a look at nine of the stocks that they chose.
Albemarle Corp. (NYSE: ALB)
Analyst Colin Rusch says specialty chemical maker Albemarle will likely continue its positive market momentum. Rusch says Albemarle is the top player in the lithium market, an enviable position as the global auto industry shifts more toward battery-powered electric vehicles. Albemarle expects its lithium business to grow in the 12 to 17 percent range annually, and Oppenheimer predicts 7 to 10 percent annual revenue growth for the company in the long term. Albemarle stock has already doubled since the beginning of 2016, but those kinds of growth numbers suggest even more upside ahead.
Activision Blizzard (ATVI)
Activision Blizzard has been one of the five best-performing stocks in the Standard and Poor’s 500 index in 2017. But even with the stock up 80 percent, analyst Andrew Uerkwitz says investors should think twice about taking profits just yet. Uerkwitz says Activision will experience some long-term tailwinds from the secular shift in gaming toward digital distribution and the growing popularity of esports. In addition, the company’s brand strength and popular franchises, such as Call of Duty and World of Warcraft, should help Activision increase user engagement and stabilize the company’s earnings.
American Express Co. (AXP)
With the stock down more than 3 percent in the past three years, American Express is certainly not a positive momentum play. However, analyst Ben Chittenden says market fears over a structural shift in the payments industry have now been fully priced into AXP stock. As the U.S. economy approaches the peak of its current cycle, he says American Express will likely see an uptick in travel and entertainment spending. With stock valuations soaring across the board, American Express’ forward price-earnings ratio of 13.5 makes is particularly appealing to value investors.
Comcast Corp. (CMCSA)
The cable TV business has been under attack from Netflix (NFLX) and other over-the-top providers for years now. But even with cord-cutters leaving cable TV in droves, Comcast has delivered consistently impressive cash flow for its investors. Analyst Timothy Horan says that cash flow coupled with Comcast’s competitive advantage in network quality, speed and integrated content makes the stock a compelling long-term investment. Horan says Comcast also has unique business flexibility despite its large size. With a forward P/E of 18.3, Comcast stock trades at roughly a 20 percent discount to its peers.
FireEye (FEYE)
There’s no stopping the digitization of the business world, which makes cybersecurity more complex and more important by the day. Analyst Shaul Eyal says FireEye is perfectly positioned to ride the secular wave in cybersecurity. Eyal says FireEye’s specialized threat analysis protection expertise is a major asset, and Oppenheimer estimates the company’s served addressable market is $1.2 billion. FireEye is a global company, with more than 4,400 end-user customers in more than 160 countries. FireEye shares have rallied 24 percent so far in 2017 but remain down more than 59 percent overall in the past three years.
Home Depot (HD)
Analyst Brian Nagel says Home Depot is the leading name in a home improvement market that’s on the upswing. Nagle says Home Depot management deserves credit for its judicious use of cash and its efficient operations. Home Depot consistently outperforms rival Lowe’s Companies (LOW) in same-store sales growth, and Nagel says Home Depot has plenty of room to top market expectations for earnings and sales comparisons in coming quarters. Home Depot also pays a respectable 2.3 percent dividend yield, and the stock trades at a reasonable forward P/E of 18.1.
Lululemon Athletica (LULU)
Lululemon stock has held up relatively well in what has been a horrible year for many U.S. retailers. Despite unprecedented competition in the athletic apparel business, analyst Anna Andreeva says Lululemon has an opportunity to deliver positive comparable-store sales growth and expand its market presence. While many retailers are closing stores in an effort to maintain profits, Lululemon is actually adding retail square footage. Andreeva says that impressive growth and an 18 percent operating margin in the current abysmal retail market warrants a premium valuation for Lululemon stock.
Restaurant Brands International (QSR)
Analyst Brian Bittner says Restaurant Brands International has several major catalysts that could drive the stock’s share price higher in the near term. First, Bittner says analysts are drastically underestimating the company’s earnings potential in 2018. In addition, the company’s recent Popeyes Louisiana Kitchen buyout provides an opportunity for Restaurant Brands to deliver unit growth above and beyond its peers. Top brands Burger King and Tim Hortons should continue build upon their positive second-quarter momentum as well, Bittner says. Finally, Restaurant Brands’ stock trades at an earnings valuation discount to its peers, despite above-average fundamentals.
Twilio (TWLO)
After a high-profile initial public offering in 2016 and a hot start to its life on the public market, Twilio stock has cooled off in the past year. Analyst Ittai Kidron says Twilio has a number of key growth drivers in place, including the rapid, widespread adoption of application-to-person communication. Kidron says increasing reliance on A2P communication will expand Twilio’s total addressable market and enable the company to leverage the power of its developer-focused sales model. Kidron sees upside to consensus revenue expectations and says Twilio is one of the top growth stories in the market.
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9 Stocks to Buy to Fight Off a September Slump originally appeared on usnews.com
