With earnings reporting for the second quarter all but over, and the summer starting to wind down, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market showing the potential for some sizable rotation, it makes sense to examine the lists and make some changes because the rest of the year could have additional volatility, as the political and geopolitical cycle could prove to be very explosive components.
The research team at BofA Securities made two changes to the firm’s US 1 List of top stocks to buy. Hill-Rom Holdings Inc. (NYSE: HRC) was removed from the list but remains Buy rated, and Medtronic PLC (NYSE: MDT) was added. The analysts also made changes to the weighting methodology and the committee process for the US 1 list during the last changes to the portfolio, so we have them again for review:
Going forward, the list will be weighted based on market capitalization, and will allocate 2% for stocks with <$100 billion market cap, 4% for stocks with $100-$400 billion market cap, and 6% for any stocks with greater than $400 billion market cap. To the extent that any security selection causes the list allocation to exceed or fall short of 100%, this excess/shortfall will be allocated equally across all stocks in the list.
Here we cover the new medical technology stock that was added and also screened the US 1 list for additional stocks in the health care sector, While all four are outstanding ideas for investors, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This medical technology giant is a solid pick for investors looking for a safe position in the health care sector, and it is the newest member of the US 1 list. Medtronic develops, manufactures, distributes and sells device-based medical therapies to hospitals, physicians, clinicians and patients worldwide.
The company announced earlier this summer that Blackstone’s life sciences division will invest $337 million into the research and development of its diabetes device technologies. Under the terms of the agreement, Medtronic will receive funding for four diabetes programs over the next several years. Medtronic’s engineering, clinical and regulatory teams will conduct the development work for the programs.
Blackstone’s investment is sought to pull forward specific programs for its diabetes pump and continuous glucose monitoring pipeline devices that aim to address unmet patient needs. If the programs are successful, Medtronic will pay royalties that are expected to be in the low- to mid-single-digit range as a percentage of sales.
Investors receive a 2.28% dividend. The BofA Securities price target for the shares is $130, and the Wall Street consensus target is $110.17. Medtronic stock closed Monday’s trading at $101.86.
This remains a solid pharmaceutical stock to own long term. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
The company reported strong second-quarter results that were largely ahead of Wall Street consensus, given the ongoing recognition of Celgene revenue. Bristol-Myers bought Celgene last year in a massive $74 billion acquisition. The posted quarterly earnings of $1.63 per share exceeded the Wall Street consensus estimate and were higher than the per-share earnings reported in the same period a year ago.
Shareholders receive a 2.83% dividend. BofA Securities has an $80 price target, while the consensus target is $72.08. Bristol-Myers Squibb stock closed at $63.62 on Monday.