Daily Archives: November 30, 2018

Growth Stocks

10 Goldman Sachs Top Stock Picks for 2019

Source: Shutterstock

Well that came around quickly! We are now drawing to the end of 2018. And that can only mean one thing: it’s time to think about 2019. Chances are high that the volatility plaguing the markets in 2018 isn’t going anywhere next year. With that in mind, you need to be extra careful about how you re-balance your portfolio for the new year. Luckily Goldman Sachs is here to help. It recently released a report of exactly the kind of stocks you want to be thinking about right now.

These are ‘high quality’ stocks specially selected by the firm. And by ‘high-quality’ Goldman Sachs means stocks that meet the following 5 factors: strong balance sheets, stable sales growth, low deviation in operating income, low stock drawdown risk, and return-on-equity that exceeds peers. In other words these stocks are the best-positioned to 1) withstand an economic slowdown; and 2) diminishing equity returns. That sounds good to me!

On top of that I used TipRanks‘ stock data to find out what other top analysts have to say on these stocks.
That way I can highlight stocks with the most bullish Street consensus from Goldman Sachs’ list.

Let’s take a closer look at these top stock picks for 2019 now:

Stock Picks for 2019: Comcast (CMCSA)

Comcast Stock Has Become Wall Street’s Quicksand

Source: Mike Mozart via Flickr

I’m with Goldman Sachs on this one. Blue chip telecoms giant Comcast Corporation (NASDAQ:CMCSA) is a worthy 2019 stock pick. CMCSA stock has an extremely stable portfolio and growing free cash flow.

Not only is its credit high-quality, but its dividend is ‘sacrosanct’, and it repurchases shares when it’s not deleveraging from strategic M&A.

“CMCSA is arguably more a safety stock than a growth stock. While its valuation is modest we’d argue so is its risk” writes RBC Capital’s Steven Cahall (Track Record & Ratings).

He has just ramped up his price target to $45, citing the recent $15 billion deal for Sky. From current levels this means we are looking at upside potential of 19%.

“Excuse Me While I Kiss the Sky” Cahall calls his report, adding “We see the strategic merits of Sky being better appreciated in time.”

True CMCSA paid a hefty multiple, but Cahall sees long-term strategic benefits from Sky, ranging from a bigger subscriber base for emerging tech investments to savings on content acquisition and accelerated advanced advertising.

This ‘Strong Buy’ stock scores 15 buy ratings vs 3 hold ratings. Its $44 average analyst price target suggests 16% upside potential. Interested in CMCSA stock? Get a free CMCSA Stock Research Report.

Stock Picks for 2019: Visa (V)

Visa stock

Source: Shutterstock

This financial stock continues to outperform. Year-to-date, Visa Inc (NYSE:V) shares have surged over 19%.

And looking forward to 2019, I see no reason why Visa’s outperformance can’t continue.

Indeed, top-rated Cantor Fitzgerald analyst Joseph Foresi (Track Record & Ratings) has just reiterated his V Buy rating. This comes with a bullish $160 price target — 18% upside potential.

“Strong growth continues” cheers Foresi, before writing: “We remain attracted to Visa’s dominant position in the global card network market and to its strong, recognizable international brand.”

Notably, Foresi highlighted Visa’s opportunity to capitalize on the global conversion of cash into credit, international opportunities, and digital payment tailwinds.

Meanwhile Visa Direct, contactless payments, and B2B all have the potential to drive share prices higher.

Out of 18 analysts polled on this ‘Strong Buy’ stock, 17 are bullish. This is with a $167 average analyst price target. Get the V Stock Research Report.

Stock Picks for 2019: Alphabet (GOOGL)

Google Stock Is a Great Long-Term Investment, but Wait to Buy

Source: Shutterstock

Tech stocks may be going through a rough patch, but here’s one mega cap Goldman Sachs thinks is still worth buying for 2019.

Trading at ~11x 2019 EV/EBITDA, Alphabet Inc’s (NASDAQ:GOOGL) valuation looks compelling, says Brent Thill (Track Record & Ratings) of Jefferies. He picks GOOGL as his Franchise Pick i.e. a high conviction stock. This is with a juicy $1,450 price target (37% upside potential).

So what justifies this bullish call?

“The Internet Team remains bullish on Alphabet due to continued expected mobile search growth and a positive stance on YouTube” explains Thill.

Online video is lining up as the biggest online ad growth driver — with GOOGL’s YouTube capable of driving meaningful upside by stealing ad budgets away from television.

Meanwhile, “mobile search has been the number one driver of revenue growth for the past several quarters and the team sees continued opportunity given the ubiquity of smartphones and the important location and contextual signals from mobile devices” writes Thill.

Plus, Alphabet also boasts its fast-growing Google Cloud, and a strong leadership position in both AI and autonomous vehicles. Its Waymo vehicles have driven many millions of miles on public roads more than peers.

Taking a step back, we can see that out of 31 analysts polled recently, 28 are bullish on the stock. This is with a $1,346 average price target (28% upside potential). Get the GOOGL Stock Research Report.

Stock Picks for 2019: O’Reilly Auto (ORLY)

Source: Shutterstock

O’Reilly Automotive Inc (NASDAQ:ORLY) is one of the largest specialty retailers of auto parts in the US, with over 5,000 stores. Already, year-to-date, shares are exploding by over 45%. And the stock has a long growth runway ahead.

Alongside Goldman Sachs, RBC Capital’s Scot Ciccarelli (Track Record & Ratings) is also a big fan of the stock.

“O’Reilly is a net market share gainer in an attractive industry,” says the analyst. And he sees four key reasons why ORLY is set to outperform. Namely: 1) strong pricing power, 2) little threat from e-commerce because the parts are too complex, 3) increasing number and age of vehicles and 4) a highly fragmented industry.

Further, steady ORLY stock performance suggests that the company is feeling little effect from price transparency/ e-commerce competition.

“Given the company’s highly consistent top/ bottom line growth we remain buyers of ORLY,” sums up Ciccarelli. He sees shares surging 10% to hit $389.

Now if we look at all analysts, the consensus is a cautiously optimistic Moderate Buy. However, if we shift to only the Street’s best-performing analysts, then the consensus also upgrades to Strong Buy. This is with a $380 average analyst price target (8% upside potential). Get the ORLY Stock Research Report.

Stock Picks for 2019: Booking Holdings (BKNG)

Source: Shutterstock

If you’re planning a holiday right now, chances are you’ll turn to Booking Holdings Inc(NASDAQ:BKNG). From a small Dutch startup, BKNG is now one of the world’s largest travel e-commerce companies. It holds Booking.com, Priceline.com, Kayak.com, Cheapflights, OpenTable and more.

From a Street perspective, what stands out is a recent upgrade from Wells Fargo’s Robert Coolbrith (Track Record & Ratings). Analysts usually reiterate their stock ratings — so when a stock is upgraded to Buy that definitely tells us something.

Plus Coolbrith simultaneously ramped up his price target from $2,150 to $2,200. From current levels, this means we are now looking at upside of close to 18%.

In this case Coolbrith cites the company’s Q3 performance and Q4 guide as well as management’s 2019 long-term strategy. This breaks down to: 1) platform investment, 2) above-market top-line growth and 3) a close focus on EBITDA dollar growth.

And crucially, even though shares are over $1,800, Coolbrith sees an appealing entry point right now. Shares are currently trading down over 5% in the last three months. “We note that shares remain significantly below historical valuation averages — BKNG’s current NTM EV/EBITDA is 12% below its 3-year median.”

Overall, BKNG stock earns a Moderate Buy analyst consensus. This comes with a $2,242 average price target — which means 23% upside potential lies ahead. Get the BKNG Stock Research Report.

Stock Picks for 2019: Dollar Tree (DLTR)

 

Source: Shutterstock

When trading is rough, defensive stocks tend to do well. And bargain retail store Dollar Tree, Inc. (NASDAQ:DLTR) is a perfect example of a defensive stock. Everything in the store sells for $1 or less.

On October 16, the NY Post reported that Carl Icahn is accumulating a stake in Dollar Tree. Apparently, we are looking at a ‘significant’ stake. On the news, DLTR stock jumped 6.8%. Icahn is an activist investor, known for pushing for changes at the company leadership level.

Five-star Oppenheimer analyst Rupesh Parikh (Track Record & Ratings) has an Outperform rating on the discount giant. He writes: “We continue to see meaningful optionality with the DLTR story from either an improving fundamental longer-term outlook or optionality with the Family Dollar asset.”

Encouragingly, he believes the stock is trading at attractive levels. This is in part down to the market undervaluing American variety store chain Family Dollar.

“At a low $80s stock price, the implied Family Dollar valuation is just a low single-digit EBITDA multiple” points out Parikh. And as for Icahn joining the team, he gives this reaction: “We await more details on Icahn’s stake and the proposed actions that could potentially unlock shareholder value from here.”

With a Moderate Buy consensus, the stock’s $94.18 average analyst price target works out at 15% upside potential from current levels. Get the DLTR Stock Research Report.

Stock Picks for 2019: Biogen (BIIB)

BLUE Stock May Have Upside of at Least 60 Percent

Source: Shutterstock

Biogen Inc (NASDAQ:BIIB) has a dominant position in neuroscience. The company has a leading portfolio of medicines to treat multiple sclerosis (MS) as well as the only FDA-approved treatment for spinal muscular atrophy (SMA).

To top it off, Biogen also boasts an extensive pipeline of new medicines in development. This includes Aducanumab for Alzheimer’s disease. It is estimated that over 25 million individuals are living with AD worldwide.

The memory loss and functional decline of Alzheimer’s disease have been linked to amyloid plaques, abnormal protein deposits that build up in the brain. Aducanumab is an antibody that binds to and may reduce amyloid plaques from the brain, potentially slowing the progress of the disease.

“We believe Biogen shares are undervalued based on our view that the company’s leadership position in neuroscience should deliver long-term growth. A business supporting high-risk, high reward studies puts BIIB in the lead to develop a potentially disease-modifying AD drug,” states Oppenheimer’s Jay Olson (Track Record & Ratings).

He has a buy rating on the stock with a $380 price target. According to Olson, BIIB has achieved a critical mass in neuroscience that enables high-risk programs with sufficient cash flow to embark on high-risk programs.

Overall this ‘Moderate Buy’ stock has scored 8 buy ratings vs 3 hold ratings in the last three months. Meanwhile the $391 average analyst price target works out at over 20% upside potential. Get the BIIB Stock Research Report.

Stock Picks for 2019: Cognizant (CTSH)

Source: Shutterstock

Goldman Sachs has just upgraded software stock Cognizant Technology Solutions Corp (NASDAQ:CTSH) from Hold to Buy. The firm’s James Schneider (Track Record & Ratings) also raised his price target for the shares to $84 from $81. He now predicts shares have 20% upside ahead.

Improving revenue growth brings prospects for a stock “re-rating,” Schneider told investors. Plus a rebound in the company’s Financial Services vertical should drive improved revenue growth in the near term.

This bullish analysis is echoed by other analysts. For example, Loop Capital’s Joseph Vafi has a Street-high $94 price target on shares (35% upside potential). Following the company’s upbeat analyst day, Vafi is even more confident in the company’s unique offer of a “full spectrum of services demanded by Fortune 500 CIOs”.

CTSH has now “successfully pivoted its business to the most leading-edge service capabilities,” and the bear case should be “put to bed”, especially given the forecast of improving margins in 2019.

Meanwhile valuation provides a positive risk/reward opportunity, with a roughly 60% multiple discount to Accenture’s PE in 2019, despite similar aggregate growth rates and higher margins.

Stock Picks for 2019: TJX Companies (TJX)

tjx stock

Source: Mike Mozart via Flickr

Owner of the discount TJ Maxx, Marshalls, HomeGoods stores and others, TJX Companies (NYSE:TJX) is a leading off-price retailer of home and fashion goods. Basically, if you’re looking for a bargain, TJX could be for you.

“Off-price remains one of our favored industries given its positive traffic, market share gains, and strong cash flow generation,” gushes five-star Guggenheim analyst Robert Drbul (Track Record & Ratings). And TJX is one of his top stock picks in this space.

“Despite expense headwinds, TJX continues to report enviable comps, one of the highest across retail landscape, fueled by traffic increases and share gains” the analyst writes. He now sees TJX delivering an impressive $50B revenues over the next five years.

Plus, TJX is a great stock for shareholders. This is thanks to its 1.7% dividend payout — a dividend which has now recorded 21 years of consecutive growth.

“Beyond the share gains and stable EPS growth, we believe with the increased dividend and the buyback program, TJX once again underlines FCF generating ability of the business model,” writes Drbul. He expects TJX to generate $2.5B of FCF and combined with $1B of repatriated cash, return all of it to shareholders with dividends and buybacks.

From top analysts, the stock scores a ‘Strong Buy’ consensus. This is with a $56 average analyst price target so we are looking at 24% upside ahead.

Stock Picks for 2019: MSCI Inc (MSCI)

DocuSign stock

Source: Shutterstock

Last but not least, comes a stock I only discovered recently, index provider MSCI Inc(NYSE:MSCI).

MSCI is a global provider of equity, fixed income, hedge fund stock market indexes and multi-asset portfolio analysis tools. It publishes the MSCI BRIC, MSCI World and MSCI EAFE Indexes.

“We continue to view the index business as a key catalyst that should produce solid top-line results (in the upper-single-to-low double digits)” is how Cantor Fitzgerald’s Joseph Foresi (Track Record & Ratings) describes the stock’s outlook.

The company is experiencing strong growth in its index business while margins are also expanding.

Foresi sums up as follows: “We expect shareholders to benefit over the long term from growth in indexing, recent investments/reorganization, margin expansion, and capital allocation.”

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Source: Investor Place

Options

Easy Way To Make 133% Profits From Higher Interest Rates

Despite all the headlines about the upcoming trade summit with China, it’s interest rate expectations that are more likely driving the financial markets. Yes, a trade war with China is bad for both countries (and the global economy) and a resolution would certainly be good news for stocks.

However, from a global perspective, interest rate levels are far more impactful on the markets. What happens with interest rates, or more precisely, with interest rate expectations, has a rippling effect across multiple asset classes.

Changing interest rates affect housing prices, commodity prices, companies with a lot of debt, companies looking to borrow, consumer spending, and everything in between. So, when Fed Chair Powell seemed to back off on another interest rate hike in December, it’s not a huge surprise that stocks rocketed higher.

On the other hand, rather than go down (or do nothing), long-term interest rates actually appeared to go a bit higher. The iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) is a very common way to track long rates and is probably the most heavily traded ETF related to interest rates.  TLT tracks bond prices which move inversely to interest rates.

You can see from the chart that TLT dropped after Powell made his dovish statement on interest rates. While the ETF definitely recovered from its lows, it certainly did not move higher – which many investors may have expected with the Fed potentially pausing its rate increase timeline.

So what does it mean?

First off, bond prices are very forward looking, and the Fed pausing a rate hike is probably a temporary situation. It’s not likely at this point that rates are going to go back down. That could change at some point, but clearly bond traders don’t believe now is that time.

What’s more, the Fed generally operates at the front-end of the Treasury yield curve. That is, it pulls levers which impact short-term rates. TLT is based on long-term rates. While short-term rates clearly have a direct effect on long-term rates, they don’t always have to move in unison. The shape of the yield curve can change as well (long and short rates moving at different times, to different extents).

As always, for further guidance, I like to see what the options market is saying. Here’s a trade that caught my interest…

A well-capitalized trader purchased 10,000 of the TLT December 21st 113-114 put spreads for $0.43 with TLT trading at $114.70. That means the trader bought the 114 puts and simultaneously sold the 113 puts. The total dollar cost of the trade is $430,000, which is also the max loss if TLT remains above $114 on December expiration.

However, if TLT drops to $113 or below, the trader makes $570,000, or 133% gains. Keep in mind, TLT only needs to drop $1.70 over the next 3 weeks for max gain to be reached. That’s only a 1.5% move in the ETF.

Basically, the trader is betting on (or hedging against) a small drop in bond prices (or a slightly higher move in long-term interest rates) by the end of the year. You many not think that a $1 wide put spread is going to be very lucrative, but as you can see, it only takes a small move in TLT for the trade to generate 133% in profits.

If you think rates are going higher or want to protect against the scenario, this trade is a cheap, easy way to do so.

 

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Market Preview

Market Preview: Trade Hope Floats Markets into December

Markets moved gingerly higher on Friday in hopes that some progress toward resolving the China/U.S. trade war will emerge from this weekend’s G20 Summit. President Trump and Chinese President Xi Jinping are scheduled to share dinner Saturday evening and discuss trade matters. Trade tariff bellwether Caterpillar rose over 4% in anticipation of good news out of the meeting between the two leaders. With the Fed softening its stance on interest rates triggering a rally earlier in the week, progress toward a trade tariff solution could propel the markets straight into a Santa Claus rally in December.  But, given the contentious nature of the trade talks thus far, many analysts are taking a wait and see attitude toward the weekend’s talks. With a ramp-up in tariffs looming, many see this meeting as a last hope for resolution before the trade war moves to a new level.

Finisar (FNSR) and Smartsheet (SMAR) kick off the final month of the year when they report earnings on  Monday. Finisar rallied nicely from the October market selloff when it was announced November 9th that II-IV (IIIV) would be acquiring the fiber optic subsystem, test and monitoring company. Analysts will be looking for an update on the deal, including the expected closing date and whether the company anticipates any hurdles to the closing. Smartsheet will be reporting its third earnings numbers since the company went public in April. The cloud based work management company has taken investors on a bit of a roller coaster ride since going public, but is up nicely from its IPO. Also reporting Monday are Coupa Software (COUP) and Mesa Air (MESA).

The economic reporting week kicks off Monday with both PMI and ISM manufacturing data. Analysts will be looking for any weakness in the numbers due to tariff issues as news from the G20 Summit is first reflected in the markets on Monday. Construction spending numbers will also be released, and are expected to come in flat month-over-month. Tuesday, motor vehicle sales and Redbook retail numbers will be released. PMI services and ISM non-manufacturing data will be presented on Wednesday. Investors will also be focusing on comments from Fed Chairman Powell as he gives his first speech following this weeks apparent change in direction by the Fed. The Chairman is scheduled to speak at 10:15. Other data coming Wednesday includes the ADP employment report and mortgage application numbers. Thursday we’ll get the Challenger job cut report and jobless claims, as well as international trade numbers and factory orders. We’ll close out the first week of December with the employment situation numbers, wholesale trade, and consumer sentiment on Friday.

Notable earnings reports next week include Dollar General (DG) and Autozone (AZO) on Tuesday. Followed by Five Below (FIVE) and lululemon (LULU) on Wednesday. This combination of retailers should provide a good view of how holiday sales on both the value and high end are shaping up so far. Thursday brings a broad view of the economy as Kroger (KR), Ulta Beauty (ULTA) and Broadcom (AVGO) all report. The last two earnings reports of the week will come from Johnson Outdoors (JOUT) and Vail Resorts (MTN) on Friday.

 

 

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.