It’s no secret that many active portfolio managers in both mutual funds and hedge funds have underperformed their benchmarks over the past few years. With technology and health care the leading sectors in the S&P 500 year to date, they may be poised to break that string. According to a recent report from Merrill Lynch, portfolio managers increased their weighting in tech again this month, bringing the sector relative weighting to the second highest level in the firm’s data history.
What intrigued 24/7 Wall St. was the list of stocks covered by the Merrill Lynch team that are rated Buy at the firm but are heavily underweighted by the fund managers. While only one was a technology company, others are top dividend-paying blue chips, and it would seem to be safe to say that if they posted solid first-quarter numbers and forward guidance, they could see some serious institutional buying. We found five in the list that look very attractive now.
This stock has had a nice run off lows posted in November, but only 28% of funds own the shares. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
With its shares trading at a very cheap 14.4 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
The company posted fourth-quarter adjusted earnings per share in line with analyst expectations, though its revenue fell short of Thomson Reuters consensus estimates and also was a slight drop from sales during the year-earlier quarter.
AT&T investors are paid a huge 4.72% dividend. The Merrill Lynch price objective for the stock is $46. The Wall Street consensus target price is $43.11. Shares closed Wednesday at $41.45.
This blue chip leader has had a solid rebound over the past year and still offers good upside as only 20% of funds own the tech giant. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high value solutions.
IBM is comprised of five major segments: 1) Cognitive Solutions, 2) Global Business Services, 3) Technology Services & Cloud Platforms, 4) Systems and 5) Global Financing. The analysts cite the company’s potential in the public cloud as a reason for raising their price objective.
IBM shareholders are paid a nice 3.22% dividend. Merrill Lynch recently boosted its price target to $200 from $185. The consensus target is $170.68, but shares closed above that level on Wednesday at $173.94.