It gets ever harder to find new stock ideas with each passing trading day. Sure Facebook and Amazon and other top companies are great stocks to buy, but many have had huge runs, and the lion’s share of the big money has been made. Toss in the fact that the market has been on an almost eight-year run, it gets even dicier. The bottom line is new idea generation, and one firm we cover is out with just that.
Steven DeSanctis, the outstanding strategist at Jefferies, acknowledges that its clients are looking for new ideas. So the Jefferies team got to work looking for small and mid-cap stocks that offer growth over value, as value outperformed last year. They also screened for higher quality companies that were domestically oriented.
The analysts came up with their “sweet 16” ideas, and here we focused on the information technology (IT) companies that made the cut. All are rated Buy at Jefferies.
Alliance Data Systems
This company has hit our insider buying screens in a big way this year, as ValueAct Holdings has been buying 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. It 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 0.88% dividend. The Jefferies price objective is $260. The Wall Street consensus target is $249.43. The stock closed last Friday at $235.04.
Booz Allen Hamilton
This company could be a big beneficiary of increased military sending. Booz Allen Hamilton Holding Corp. (NYSE: BAH) is a leading provider of management consulting, technology and engineering services to the U.S. government in defense, intelligence and civil markets, as well as to major corporations and not-for-profit organizations. Wall Street sees the company using the firm’s cash stockpile for acquisitions and the possibility for increased dividend payouts.
Jefferies also sees the potential for additional growth at the company through potential acquisitions. With cybersecurity also becoming a major priority for U.S. commercial companies, Booz Allen could benefit there as well. The analysts also cite the huge carve-out in the federal budget for cybersecurity as a big positive going forward.
Shareholders receive a 2.12% dividend. Jefferies has a $40 price target, while the consensus target is $40.50. The stock closed on Friday at $34.71.
This is another top payments provider that has positive upside potential. Fiserv Inc. (NASDAQ: FISV) is a leader in financial services technology and enables clients to achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management and business insights and optimization.
The company’s Payments and Industry Products segment provides debit, credit and prepaid card processing and services; electronic bill payment and presentment services; Internet and mobile banking software and services; person-to-person payment services; and other electronic payments software and services. This segment also offers card and print personalization services, investment account processing services for separately managed accounts, and fraud and risk management products and services.
The Financial Institution Services segment provides account processing services, item processing and source capture services, loan origination and servicing products, cash management and consulting services, and other products and services that support various types of financial transactions.
The $125 Jefferies price target compares with the consensus target of $111.95. Shares closed most recently at $111.98.
A growing economy could be a huge plus for this top cloud company. Paycom Software Inc. (NYSE: PAYC) provides cloud-based human capital management (HCM) software solutions delivered as software-as-a-service for small to midsized companies in the United States. It provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement.
The company’s HCM solution offers a suite of applications in the areas of talent acquisition, including applicant tracking, candidate tracker, background checks, on-boarding, E-Verify and tax credit service applications; time and labor management, such as time and attendance, scheduling/schedule exchange, time-off requests, labor allocation, labor management reports/push reporting; and geofencing/geotracking applications.
Jefferies has set its price target at $60. The posted consensus is $57.50. The shares closed on Friday at $53.38.
Four companies that make solid additions to aggressive growth portfolios. All are hitting on all cylinders and should continue to have solid growth prospects for the rest of 2017 and beyond.