Jefferies Highest Conviction Franchise Picks for Big Upside in 2014
During the end of last year and into 2014, most of the firms we cover on Wall Street had their top stock pick lists for the coming year. Most companies take great care in putting these lists together as they become evidence for the company to be judged on. While the rising tide lifted almost all boats last year, 2014 is already proving to be anything but a given.
The Jefferies “Franchise” stock picks for 2014 are an eclectic group that may offer investors some ideas that are not highly touted on Wall Street. The chosen names range in market capitalization from $2 billion to $300 billion. While the average price-to-earnings (P/E) ratio is 16 times earnings, multiples range from seven times to 40 times earnings. Most importantly, the Jefferies earnings estimates average 9% more than the street. Which means if the Jefferies team is right on the numbers, these top stocks to buy may have big upside.
We picked the names on the Jefferies Franchise picks list with the biggest upside to their posted target prices.
Abbott Laboratories (NYSE: ABT) is a top pharmaceutical name to make the Jefferies list. The company reported in-line fourth quarter earnings but missed on the revenue numbers. It also announced that it plans to repurchase $2 billion in stock in 2014. Investors are paid a 2.2% dividend. The Jefferies price target for the stock is $48. The Thomson/First Call estimate is set at $41.46. Abbott Labs closed Thursday at $37.43.
Activision Blizzard Inc. (NASDAQ: ATVI) is a top video game stock to buy for 2014. The company pushed out a new installment of its cornerstone Call of Duty franchise, called Ghosts, on November 5. The title was the top-selling game during that month and in December. With new gaming consoles from Microsoft and Sony flying out of the stores this past holiday season, and into the new year, the company can expect some strong sales on its top titles. The Jefferies price target is $23, while the consensus figure is lower at $21.23. The stock closed Thursday at $16.67.
Agilent Technologies Inc. (NYSE: A) makes its debut on the Jefferies list. The analysts added Agilent in order to increase their exposure to a potential rebound in capital spending. In addition, the planned separation of the company into a more defensive life sciences business and more cyclical electronic measurement company has the potential to improve valuation. Investors are paid a 0.9% dividend. The Jefferies price target for the stock is $65. The consensus is set at $62.71. Agilent closed Thursday at $59.47.
Freeport-McMoran Copper & Gold Inc. (NYSE: FCX) has been battered as investors have fled mining companies. The company is planning to enter the U.S. oil and gas space, which could truly make it a powerhouse. The company reported strong third-quarter earnings that beat Wall Street expectations convincingly. Fourth-quarter earnings were solid, but sales numbers were slightly lower than expected. Investors are paid a solid 3.5% dividend. Jefferies has a $45 price target for the stock, and the consensus is posted at $39.85. The stock closed Thursday at $33.68.
Ingersoll-Rand PLC (NYSE: IR) is a top industrial name that is showing up on the stocks to buy lists at many of the major Wall Street firms we cover. It makes the Jefferies Franchise list as well. With the housing market continuing to grow this year, the company’s wide range of portfolio products should continue to sell well. Investors are paid a 1.3% dividend. Jefferies has posted a $68 price target, and the consensus price objective for the stock is $63.42. Ingersoll-Rand closed Thursday at $60.67.
Intel Corp. (NASDAQ: INTC) hits the Jefferies screens, and the chip giant may be due for an up year. Commercial PC purchases have picked up and the company is working on boosting the ability of its general-purpose processors to move high volumes of data. Shareholders are paid a very nice 3.5% dividend. Jefferies has a $32 price target assigned to the stock. The consensus price target for the stock is $25.24, but not that Intel closed Thursday at $25.13.
Micron Technology Inc. (NASDAQ: MU) is a global leader in advanced semiconductor systems. Micron’s broad portfolio of high-performance memory technologies, including DRAM, NAND and NOR Flash, is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications. The Jefferies price target for the stock, which soared last year, is $30. The consensus target is posted lower at $27.29. Micron closed Thursday at $23.64.
Microsoft Corp. (NASDAQ: MSFT) will soon head in to uncharted waters when it appoints a new CEO who is not from within the company. The leading candidate, and a Wall Street favorite, was current Ford CEO Alan Mulally. That has been squashed and the company continues its search. With the Xbox One poised to be one of the fastest selling gaming consoles ever, the fourth-quarter sales for the company were outstanding. Investors are paid a very solid 3.1% dividend. The Jefferies price target for the software giant is $42. The consensus target is lower at $37.26, and Microsoft closed Thursday at $36.05.
Restoration Hardware Holdings Inc. (NYSE: RH) has been a momentum trader’s dream and makes the Jefferies list. The company returned from private equity purgatory and had its IPO late in 2012, hitting the market at $24 and quickly rising to the mid-$30s. Then suddenly last June things took off. That coincided with a fantastic first-quarter earnings release, posting a 41% increase in comparable sales over the previous year. Recently the stock got caught up in the retail related sell-off and may offer investors an excellent entry point. The Jefferies price target is a whopping $88, and the consensus is at $76.33. The stock closed Thursday at just $58.64.
SolarWinds Inc. ( NYSE: SWI) offers customers enterprise-class network management products, including SolarWinds Network Performance Monitor that monitors and analyzes network performance metrics for routers, switches, servers and other simple network management protocol enabled devices. The business is solid with a clean balance sheet and the growth is still on the high end. Jefferies has a $45 target, while the consensus figure is at $42. SolarWinds closed Thursday at $41.19.
The Jefferies Franchise stock picks offer a little something for everybody. High-flying mega Internet stocks are noticeably absent from the list. The Jefferies team has focused on core holdings that can offer solid growth for 2014 and beyond. With the market slipping out of the gate, investors may want to bide their time as they look to apply fresh portfolio capital.