Merrill Lynch Out With Top 10 Stock Ideas for Q4

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As incredible as it may seem, the third quarter is history and the fall colors and football are back. The markets had another very solid quarter, with the S&P 500 climbing more than 3%, the Dow almost 5% and the Nasdaq more than 5%. Stock markets have managed to clock some steady gains, and new records, even as tensions between the United States and North Korea loomed. The second-quarter earnings reporting season, which occurred early in the third quarter, was generally very positive.

As we start the fourth quarter, many of the top firms we cover on Wall Street are out with their top ideas. A new Merrill Lynch research report offers the firm’s top ideas for the final quarter of 2017: eight stocks to buy and two that are expected to underperform. We focus on the long ideas, and at first glance, they look like outstanding ideas for growth stock accounts.

CarMax

This is the top stock to buy now in the consumer discretionary sector. CarMax Inc. (NYSE: KMX) is the nation’s largest specialty retailer of used vehicles and has been in operation since 1993, when it was a subsidiary of Circuit City. CarMax focuses primarily on the used vehicle market, but it has a handful of new vehicle stores as well. It also has its own in-house financing arm (CarMax Auto Finance). In the used market, CarMax generally targets the late-model segment (one- to six-year-old cars and trucks) and offers no-haggle, transparent pricing.

The huge storm damage in Florida and Texas may be a big plus for the company, as it is possible that as many as 500,000 or more cars have to be replaced.

The Merrill Lynch price target for the stock is $82. The Wall Street consensus target is $86.87. Shares are trading Thursday at $76.45.

Liberty Media

This is a solid play for investors who feel media content will stay big. Liberty Formula One Group (NASDAQ: FWONK) is a tracking stock of Liberty Media, a long-time owner of media, communications and entertainment businesses. The assets attributed to the company include:

  • Formula 1 (F1), the exclusive holder of the Formula 1 World Championship
  • A 34% stake in Live Nation
  • And stakes in other public securities and private investments

Merrill Lynch has a $45 price target, and the consensus target is $39.34. Shares traded Thursday at $40.75.

Norwegian Cruise Line

This stock has sold off recently and is offering a very good entry point. Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) is the world’s third-largest cruise company, and it owns and operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

The company acquired Prestige Cruise Holdings, the parent company for Oceania and Regent Seven Seas Cruises, in 2014 to diversify into the premium and luxury segments of the market and expand its global footprint. Today, Norwegian has 25 ships across all three brands and offers itineraries to more than 510 destinations.

The $68 Merrill Lynch price target compares with the consensus estimate of $64.72. Shares traded Thursday at $58.05.

Occidental Petroleum

This is one of the highest yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals. The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. The chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.

With a rock-solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.

Shareholders receive a 4.8% dividend. The Merrill Lynch price target is $70. The consensus target is $63.55, and shares traded Thursday at $64.30.