If there is one thing that is clearly evident on Wall Street this year, it is that there is some very divergent thought among the major firms we cover. Some are still very bearish and suggest selling every rally immediately. Others are far more positive and point to the basically solid economic news that continues to come out. With the dollar’s strength really abating and the economy growing, albeit slowly, one company we cover is staying positive on the current market.
In a new report, Robert Sluymer and his outstanding team at RBC make the case that history tells us that declines in secular bull markets like we have seen twice in the past nine months are shallow, and the rebounds are often very powerful and sustained. The report also points to the continuing dollar weakness as a positive for stocks, especially cyclicals, some of which have a large percentage of sales outside the United States. Most importantly, they say not to sell but to add shares on dips.
The analysts point to numerous sectors in their report, and the stocks that looked good. We found three financial companies that look good now. They combine solid fundamentals with outstanding technical patterns.
This top financial stock has been on a roll since February, and it looks poised to move higher. Aon PLC (NYSE: AON) provides risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing services worldwide. The company operates through two segments.
The Risk Solutions segment offers retail brokerage services, including affinity products, managing general underwriting, placement, captive management services, and data and analytics; risk management solutions for property liability, general liability, professional liability, directors’ and officers’ liability, workers’ compensation, and various health care products; and health and benefits consulting services comprising structuring, funding and administering employee benefit programs.
The HR Solutions segment offers human capital services in the areas of retirement, compensation, strategic human capital, investment consulting, benefits administration, exchanges and human resource business process outsourcing. With operations in more than 120 countries, the company utilizes its resources to develop individual as well as group insurance programs. It offers its services globally across personal lines, mid-market companies and multinational companies.
The company posted very solid first-quarter earnings results. Operating earnings came to $1.35 per share and were ahead of the consensus. Revenues though missed estimates, coming in at $2.79 billion.
AON investors receive a 1.25% dividend. The Thomson/First Call consensus price target is $107.94. Shares closed Tuesday at $105.77.
This company continues to be the gold standard of Wall Street banks and trades at a low 11.2 times estimated 2016 earnings. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity, debt and derivatives business, an ultra high net worth clientele, top investment banking and capital markets expertise. The bank continues to be a dominant force around the world and is one of the most sought after in the world. And it is one of the very few that dictate who can be a client at the firm.
In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1.5 trillion of announced mergers and acquisitions transactions last year, the highest level the bank has ever recorded. It also has maintained a leading market share over the past 25 years. It maintained a market position when merger and acquisition activity was dominated by technology in 1999, by financials in 2008 and by natural resources in 2014. The bottom line is, regardless of where market strength is in any given year, Goldman Sachs is up to the task.
Shareholders are paid a 1.6% dividend. The consensus price target for the stock is $189.70. Shares closed Tuesday at $163.14.
This stock trades at a very low 10.9 times estimated 2016 forward earnings. JPMorgan Chase & Co. (NYSE: JPM) is expected to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on estimated price-to-earnings and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide an earnings headwind throughout this year.
Improvement in loan growth, slow but improving equity capital markets, and a steady increase in deposits will be a solid plus. Trading at a discount to many of the large cap banks on 2016 earnings estimates helps upside potential as well. With $2.6 trillion in assets on a worldwide basis, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy for investors.
Dimon also recently put his money where his mouth was and was reported to have bought a stunning 500,000 shares of the stock for a massive $26 million. It brings his total holdings in the bank to 6.7 million shares, worth over $360 million.
JPMorgan investors receive a 2.82% dividend. The consensus price target is $70.70. The shares ended Tuesday at $62.56.
Three top picks technically that are sound buys on a fundamental basis. While the month of May can often be volatile one, investors may want to buy partial positions and see if we don’t take a dip.