The details about the new tax plan finally hit the tape last week, and for the most part, it offers the potential for some stellar change for many Americans and especially for corporations. Politicians and CEOs have long grumbled over the high corporate tax rate in the United States, currently the second highest is the world. Lowering that to 20%, and allowing companies to repatriate huge amounts of overseas cash at a much lower rate could be huge for potential growth.
In a new research piece, Jefferies screened for companies that have had higher average tax rates and have seen less multiple expansion during the large rally we have seen. The report noted this:
We looked for stocks that have seen less multiple expansion than the market and also have higher than average tax rates. Jefferies analysts highlight 17 Buy-rated stocks among these. The sectors and stocks likely to see the biggest boost from tax reform are often not the sectors that have performed best since the election, and that may create an opportunity.
In the Jefferies list, we found five rated Buy that look like good choices for investors concerned about the stretched levels of the stock market. All make good additions for growth accounts.
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 are paid a small 0.90% dividend. The Jefferies price objective for the stock is $270, and the Wall Street consensus target price is $267.50. The stock closed Monday at $230.69 per share.
Advance Auto Parts
This big player in the after-market auto parts industry was mauled recently, and Jefferies likes the set-up for the rest of 2017 and beyond. Advance Auto Parts Inc. (NYSE: AAP) is the second largest auto parts retailer in the United States, Puerto Rico and the Virgin Islands. It operates more than 4,000 stores under the Advance Auto Parts brand, as well as nearly 200 AutoPart International locations. It sells to both do-it-yourself customers and professional installers.
The stock has been hit hard this year, and that makes for an interesting value play for investors. Down a whopping 50% from highs hit back in January, any good news for this company, as well as some benefit from the tax changes, could reignite the shares.
Shareholders are paid a small 0.30% dividend. Jefferies has set its price target at $130, while the consensus target is much lower at $107.18. The stock closed trading Monday at $80.71.