These stocks are a good value.
The analyst team at Oppenheimer recently released its list of top stocks to own for the next 12 months. With the Standard & Poor’s 500 index surging another 2.2 percent in the past month to new all-time highs, investors concerned about steep stock valuations are looking to be as selective as possible. Each Oppenheimer equity analyst contributed one top stock idea for the next year. Analysts selected what they see as the most timely investments based on company fundamentals and prevailing market conditions. Here’s a look at 10 of the stocks they chose.
Broadcom Ltd (Nasdaq: AVGO)
Analyst Rick Schafer says Broadcom is the gold standard in the red-hot semiconductor industry. Even with Broadcom stock already up nearly 40 percent this year, Schafer says AVGO will continue to outperform the market. Broadcom is the market leader in the high-end filter business, a segment that is experiencing a secular growth trend, he says, and Broadcom’s technology advantages are compounded by management and manufacturing advantages.
CIT Group (CIT)
Financials have been popular stocks among investors in 2017. The climate of deregulation in Washington coupled with a series of interest rate hikes from the Federal Reserve have given banks more wiggle room for profitability. While big investment banks struggle with slumping trading revenues, analyst Chris Kotowski says regional banks such as CIT Group are well-positioned to benefit from an improving core banking environment. CIT’s stock trades at a price-tangible book value 1.06, but Kotowski says that ratio will likely expand as CIT eventually closes its valuation gap relative to peers.
Comcast Corp. (CMCSA)
The traditional cable TV business hasn’t been a popular investment in recent years due to the outflow of cord-cutter viewers, but analyst Timothy Horan says investors may be underestimating Comcast’s resiliency. Despite major share gains from Netflix (NFLX) and other streaming services, Comcast has continued to deliver consistent cash flows. In addition, Horton says the company has several advantages over peers, including network quality, speed and content integration. Horan says Comcast’s cash flow, size and resource pool give the company the flexibility it needs to thrive. The stock also trades at a discounted price-earnings ratio of 18.
Estee Lauder Companies (EL)
Reports that Amazon.com (AMZN) is beefing up its makeup offerings have sent Ulta Beauty (ULTA) shares plummeting 31 percent in the past six months. Incredibly, even in the face of growing competition, Estee Lauder’s stock has been the mirror image of Ulta’s, gaining 31 percent in the same time. Analyst Rupesh Parikh says Estee Lauder is successfully fending off the competition by launching compelling products, positioning itself in key international markets and delivering strong growth via targeted acquisitions. Parikh says Estee Lauder’s positive momentum could continue into fiscal 2018 and 2019.
Expedia (EXPE)
Competition has also heated up in the online travel business, but analyst Jed Kelly says Expedia is well-positioned to gain market share from its peers. Kelly says management has consistently made smart decisions with its strategic capital deployment, and Expedia’s acquisition of HomeAway is a prime example. Expedia purchased the vacation rental site back in December 2015 for a steep $3.9 billion. Kelly says HomeAway’s unique inventory of properties coupled with Expedia’s online optimization is a highly accretive winning recipe for long-term investors. These types of strategic moves are how Expedia has consistently delivered revenue growth above 15 percent.
FireEye (FEYE)
As more businesses move their precious resources and data online, cybersecurity has become one of the most valuable enterprise services in the world. Analyst Shaul Eyal says FireEye is well-positioned to be the market leader in one of the largest secular growth markets in the technology sector. Oppenheimer estimates that FireEye’s served addressable market is $1.2 billion. Adoption of FireEye’s signature-based solutions could expand the company’s total addressable market to as high as $64 billion. FireEye stock has struggled meeting lofty market expectations in recent years, but Eyal says its long-term growth story remains intact.
Home Depot (HD)
Analyst Brian Nagel says CEO Craig Menear’s commitment to “stringent cost controls and cash discipline” is a major reason why Home Depot is one of the few large U.S. retailers that have thrived in the Amazon era. Home Depot has consistently outperformed Lowe’s Companies (LOW) in terms of same-store sales growth. Nagel says Home Depot is the clear leader in the booming home improvement sector and has the potential to pleasantly surprise investors with its earnings and sales upside. Home Depot pays a decent 2.1 percent dividend and trades at a reasonable forward P/E ratio of 19.8.
Michael Kors Holdings (KORS)
For more than two years, Michael Kors stock has been punished for declining profitability, and the stock has traded at an extremely discounted earnings multiple. However, analyst Anna Andreeva says rising average unit revenue and stabilizing margins are signs that the profitability cycle may have bottomed. If the company can follow up on a strong fiscal first quarter with yet another earnings beat, Andreeva says the stock’s forward P/E of 12.6 has plenty of room for expansion. Rising analyst estimates could serve as catalysts for the stock as Wall Street adjusts its conservative outlook.
Restaurant Brands International (QSR)
Analyst Brian Bittner sees several key catalysts for Restaurant Brands stock over the next 12 months. Oppenheimer is projecting 2018 EPS to easily top consensus Wall Street estimates, and the company’s Popeyes Louisiana Kitchen buyout is expected to allow QSR to deliver best-in-class unit growth among its fast food peers. Burger King and Tim Hortons, which account for 90 percent of the company’s profits, are expected to benefit from easy year-over-year sales comparisons.
Take-Two Interactive Software (TTWO)
According to analyst Andrew Uerkwitz, Take-Two is the best play in a video game industry that is in the middle of a profitable transition from physical to digital distribution. Uerkwitz says this transition should provide earnings and revenue tailwinds for all major video gaming stocks, but Take-Two is uniquely positioned in the group due to multiple timely franchise refreshes, including “Red Dead Redemption 2,” expected to take place over the next five years. Uerkwitz expects more game downloads and increased spending on additional downloadable content will boost profitability and margins in coming years.
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10 Stocks That Oppenheimer Analysts Adore originally appeared on usnews.com
