Investing

UBS Out With Top Pick Stocks to Buy for 2017

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As we have reported recently, many of the top firms on Wall Street that we cover at 24/7 Wall St. have made some final tweaks and changes to their top stock picks lists that they provide to institutional and high net worth clients. With this year proving to be outstanding for investors, and the S&P 500 up double digits, now is a good time for investors to maybe shed some losers and add some new stocks for the stretch run and 2017.

The UBS analysts have compiled their list of Top Picks for the next 12 months and present their analysts favorite companies. In their own words “Favorite” in this case is defined as those stocks their Equity Sector Strategy team feels are best positioned in their respective industries to outperform their respective sector benchmark over a 12-month investment horizon.

We screened the stock by sector and picked five that also pay good dividends.

Dominion Resources

Many of the Wall Street firms that we cover are still very positive on utilities, and this company is highly rated. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.

Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers around regulated natural gas distribution and storage.

Investors receive a solid 3.65% dividend, which recently was raised by 8%. The UBS price target for the stock is $77. The Wall Street consensus price target is $78.29. The stock closed Tuesday at $76.67.

Energy Transfer Partners

This stock was acquired by Sunoco Logistics Partners recently. Energy Transfer Partners L.P. (NYSE: ETP) engages in the natural gas midstream and intrastate transportation and storage businesses in the United States.

The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines.

The Midstream segment gathers, compresses, treats, blends, processes and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities and four natural gas conditioning facilities.

The Liquids Transportation and Services segment transports mixed natural gas liquids (NGLs) and other hydrocarbons; stores mixed NGLs, NGL products and petrochemical products; and separates mixed NGL streams into purity products. It owns and operates various NGL pipelines and NGL storage facilities with aggregate storage capacity of approximately 51 million barrels. Its Investment in Sunoco Logistics segment gathers, purchases, markets and sells crude oil, and it owns and operates 1,800 miles of refined products pipelines.

Sunoco Logistics announced a definitive agreement to acquire Energy Transfer in a unit-for-unit transaction at an implied price of $39.29 per unit, flat with its Friday close, and a 10% premium to Energy Transfer 30-day volume weighted average price. Energy Transfer unitholders will receive 1.5 Sunoco Logistics common units for each ETP unit owned. The deal, expected to close in the first quarter of 2017, is subject to customary closing conditions and the receipt of unitholder approval.

Energy Transfer unitholders receive an 11.6% distribution. UBS has a $44 price target, and the consensus target is $44.70. Shares closed Tuesday at $36.16.

Halliburton

This is one of the three energy sector stocks in the Top Picks portfolio, and it is still down almost 25% from highs printed two years ago. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. It serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

The oil field giant announced last year a $1 billion investment to develop huge potential oil fields in Ecuador and has entered into a long-time deal with Petroamazonas, an Ecuador-based company involved in the exploration and development of the country’s oil reserves. With oil looking to stabilize in the $40 to $50 range, this top oil service company is a great stock to buy on sale, as the oil recovery has shown some legs.

Halliburton is the second-largest provider of oil services and the number one player in pressure pumping services worldwide. Revenues in 2015 totaled $27.8 billion and EBITDA was $7.2 billion. For investors looking for an oil field services company to add, this is arguably the best.

Halliburton shareholders receive a 1.33% dividend. The $57 UBS price target is less than the consensus target of $58.38. The shares closed Tuesday at $54.91.

Nordstrom

This is one of the top retail picks at UBS, and the company bounced back with solid third-quarter results. Nordstrom Inc. (NYSE: JWN) is a fashion specialty retailer that offers apparel, shoes, cosmetics and accessories for men, women and children in the United States and Canada. It operates through two segments.

The Retail segment offers a selection of brand name and private label merchandise through various channels, including Nordstrom branded full-line stores and online store at Nordstrom.com, Nordstrom Rack stores, Nordstromrack.com and HauteLook, as well as other retail channels, including Trunk Club showrooms and TrunkClub.com, Jeffrey boutiques and clearance store that operates under the name Last Chance.

The Credit segment operates a federal savings bank that provides a private label credit card, two Nordstrom VISA credit cards and a debit card. Its credit and debit cards feature a shopping-based loyalty program.

As of December 5, 2016, the company operated 349 stores in 40 states, including 123 full-line stores in the United States, Canada and Puerto Rico; 215 Nordstrom Rack stores; two Jeffrey boutiques; and two clearance stores.

Investors receive a 3.02% dividend. The UBS price target is $64. The consensus price objective is $54.06, and the stock closed at $48.96.

Philip Morris International

This company has continued to grow global market share and makes good sense for total return investors now. Philip Morris International Inc. (NYSE: PM) is the world’s leading international tobacco company, with six of the world’s top 15 international brands and products sold in more than 180 markets.

In addition to the manufacture and sale of cigarettes, including Marlboro, the number one global cigarette brand, and other tobacco products, the company is also engaged in the development and commercialization of reduced-risk products (RRPs), the term it uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Through multidisciplinary capabilities in product development, state-of-the-art facilities and industry-leading scientific substantiation, Philip Morris aims to provide an RRP portfolio that meets a broad spectrum of adult smoker preferences.

The company reported earnings slightly below estimates, but the full-year underlying guidance remains the same. The analysts expect the fourth quarter to be very solid.

Shareholders receive a 4.56% dividend. The $100 UBS price target compares with the consensus target of $101.06. Shares closed on Tuesday at $91.33.

Given the big run-up in the market since the election, investors may want to buy partial positions here and see if we don’t consolidate some in January. Many investors may be waiting to sell winners next year as they expect tax changes to be positive under the new administration.

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