One would think after an eight-year bull market where a large part of the performance has been driven by momentum mega-cap technology companies, that Wall Street strategists would be leaning toward value after a spectacular growth run. What really becomes important in an aging bull market is rotating from passive to active management, as indexing often starts to lose steam when markets tire out.
In a new Jefferies research report, top flight strategist Steven DeSanctis and his team make just that case, that in essence stock picking is now critical for success going forward. They are looking at companies that they feel offer “growthier growth.” They noted this in the report:
We screened the Russell Midcap Growth and Russell 2500 Growth for names between $2 billion and $30 billion, in the top return on equity quintile, and with consensus fiscal year sales growth greater than 10%. We are excited to see a diversified list of ideas from quite a few sectors with Discretionary and Tech dominating.
We screened the list for companies that also tend to do well year round and found five outstanding picks.
Alliance Data Systems
This company has hit our insider buying screens in a big way this year, as ValueAct Holdings has purchased a substantial number of shares in Alliance Data Systems Corp. (NYSE: ADS). The company is a provider of data-driven marketing and loyalty solutions serving consumer-based businesses in a range of industries.
The company offers a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services and private label and co-brand retail credit card programs.
Alliance Data Systems operates through three segments.
- LoyaltyOne provides coalition and short-term loyalty programs through the company’s Canadian AIR MILES Reward Program and Brand Loyalty.
- Epsilon provides end-to-end, integrated marketing solutions.
- Card Services provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the company’s private label and co-brand retail credit card programs.
Shareholders receive a 0.81% dividend. The Jefferies price objective is $270, and the Wall Street consensus price target is $275.52. The stock closed Wednesday at $258.94.
This company pioneered the artificial heart valve, and it could be poised for big growth. Edwards Lifesciences Corp. (NYSE: EW) provides products and technologies to treat structural heart disease and critically ill patients worldwide. The company offers transcatheter heart valve therapy products, comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves.
The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system, as well as tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve.
Top Wall Street analysts feel that the company’s acquisition of privately held CardiAQ last year made good sense going forward. CardiAQ has human implants of transcatheter mitrial valves, and Edwards is focused on the mitrial valve opportunity after its very strong success in aortic valves. The company also has had tremendous success with transcatheter valve replacement. Transcatheter heart valve replacements are rapidly gaining favor in the medical community for use in those patients who are deemed unsuited for open heart surgery, and they are a fast growing revenue stream for the company.
Jefferies has a $115 price target, and the consensus target is $122.39 The shares closed Wednesday at $118.89.