One thing that a big market sell-off will do is shake out the names that are lacking in relative strength. It also will lower prices on stocks that are on the radar screens of the top firms, but are just too expensive to recommend based on valuation. With some Wall Street pundits calling for a continued massive sell-off, and others saying this is just a head fake in an upwards trending market, it becomes difficult for investors to know when is the right time to put some new capital in.
The equity strategists at Credit Suisse have used the sell-off to make some massive changes in their Top Picks list. They add 10 top new names to buy and delete 11 from the list. Many of the deletions do indeed appear to be because of valuation calls, while the additions are a host of names that have had positive earnings and numerous Wall Street upgrades. Stocks are added in six sectors allowing a wide range of top new names to buy.
Allergan Inc. (NYSE: AGN) is added to the list in the health care sector. The company reported solid earnings and a host of Wall Street firms lifted their ratings on the stock. The company benefits from the strongest balance sheet among its peers and a stable revenue base from some established drugs. The Credit Suisse team thinks investors should see double-digit annual growth through 2018 from a couple of key products: Botox injections and the eye treatment Restasis. Investors are paid a miniscule 0.2% dividend. The Credit Suisse price target is $123. The Thomson/First Call estimate is $122.39. The stock closed Thursday at $117.37.
Carnival Corp. (NYSE: CCL) is a new consumer discretionary name added at Credit Suisse. The company recently reported that its January bookings volume jumped 17% year over year. Between Jan. 1 and Jan. 31, 2014, Carnival saw net bookings (new reservations minus cancellations) of more than 565,000 guests. In addition to the record bookings, the company says its website saw an all-time high of 13 million visits in the one-month period. The bookings were at record levels across the entire fleet of 24 ships. Investors are paid a reasonable 2.6% dividend. The Credit Suisse price target is $43, and the consensus target is $39.91. Carnival closed Thursday at $40.13.
Chipotle Mexican Grill Inc. (NYSE: CMG) has become the momentum trader’s dream stock, and it is added to the list. The company has more than 1,500 restaurants worldwide and is planning on opening up to 195 new restaurants this year. Like many companies, Chipotle has also considered increasing its stock buyback program, which speaks to the company’s confidence in the growth of its business. The Credit Suisse price target is a gigantic $640, while the consensus number is $573.96. Chipotle closed Thursday at $544.47.
Hormel Foods Corp. (NYSE: HRL) is the only consumer staples name added to the list. The company produces of a variety of meat and food products. The meat products are sold fresh, frozen, cured, smoked, cooked and canned. The shelf-stable segment includes canned luncheon meats, microwaveable entrees, stews, chilies, hash, meat spreads, flour and corn tortillas, salsas, tortilla chips and other items that do not require refrigeration. Investors do receive a 1.8% dividend. Credit Suisse started it with a $49 price target, and the consensus number is $46. The stock closed Thursday at $43.40.
Intel Corp. (NASDAQ: INTC) hits the technology screens, and the chip giant may be due for an up year. Commercial PC purchases have picked up and the company is working on boosting the ability of its general-purpose processors to move high volumes of data. Shareholders are paid a very nice 3.7% dividend. Credit Suisse has a $30 price target assigned to the stock. The consensus price target is $25.24. Intel closed Thursday at $23.99.
Micron Technology Inc. (NASDAQ: MU) is a global leader in advanced semiconductor systems and is another tech name added at Credit Suisse. Micron’s broad portfolio of high-performance memory technologies — including DRAM, NAND and NOR Flash — is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications. The Credit Suisse target for the stock, which soared last year, is $30. The consensus target is lower at $27.29. Shares closed Thursday at $24.11.
Microchip Technology Inc. (NASDAQ: MCHP) was recently touted at Stifel as a player in the Internet of Things world. It is also added to the Credit Suisse top technology picks list. Microchip has directly partnered with multiple industry-leading sensor manufacturers and sensor-fusion specialists to create a solution, enabling faster time to market without the need for sensor-fusion expertise. The company is a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions. The Credit Suisse price target is $48. The consensus price target is $49.20. The stock closed Thursday at $43.71.
Raymond James Financial Inc. (NYSE: RJF) is added to the list in the financials sector, and with good reason. The company reported impressive results on the back of strong performance by its asset management and private client group divisions. The company’s first-quarter fiscal 2014 earnings per share of $0.81 outpaced the consensus estimate of $0.73. Moreover, this was significantly above the prior-year quarter figure of $0.61 per share. Shareholders are paid a 1.3% dividend. The Credit Suisse price target for this super-regional brokerage firm is $60, and the consensus target is $58.45. The stock closed Thursday at $48.80.
Stratasys Ltd. (NASDAQ: SSYS) is a top new industrial name added to the list. The company is a top name in the 3D printing area that has been so hot over the past two years. In an effort to build up its Makerbot awareness, the company decided to team up with eBay to utilize e-commerce to sell 3D printing services. Credit Suisse has a $144 price objective, and the consensus target is $143.22. The stock ended Thursday’s trading at $112.20.
Wal-Mart Stores Inc. (NYSE: WMT) is another consumer discretionary name added at Credit Suisse, and rounds out the top 10 new additions. The retail giant recently announced huge investment in Canada to expand its footprint there. The company plans to spend almost a half a billion Canadian dollars to open new stores. It is also expected to hire 7,500 new associates. Investors receive a 2.6% dividend. The Credit Suisse price target is posted at $87, while the consensus is $83.13. Walmart closed Thursday at $72.82.
With a large spike in volatility, and very mixed messages from Wall Street, investors are wise to stay very agile and defensive. It is very possible that the sell-off may turn into a full-fledged 10% or even greater correction. That will help make prices much more palatable and also cool some of the speculative fervor that has gripped the market over the past year. Keeping a little dry powder makes continued good sense now. So do the new additions to the Credit Suisse Top Picks list.