While some say valuations are stretched, and the bull market is tired, the bottom line is the market has basically gone sideways for almost a half a year. In a new research report, the analysts at Merrill Lynch say that cyclical growth stocks are the way to go for the rest of the year, and it’s a good chance that large cap names will outperform. They published a list of inexpensive large cap cyclical growth names. We screened the list by sector for names that were only rated Buy at the firm.
Here are some of the top inexpensive cyclical stocks to buy at Merrill Lynch.
Best Buy Co. Inc. (NYSE: BBY) recently released earnings, and many analysts on Wall Street are positive on the stock. The company met its rivals head-on with price-matching policies that largely eliminated the advantages of those competitors. More importantly, its store-within-store formats for makers of popular mobile devices and computers have drawn interest from major manufacturers, letting Best Buy take advantage of its retail space to give it competitive advantages that online retailers cannot match. Investors are paid a 2.5% dividend. The Merrill Lynch price target is $36, and the Thomson/First Call target has fallen to $32.67. Best Buy closed Friday at $27.01, up more than 3%. The stock is still down more than 40% from its high.
Cisco Systems Inc. (NASDAQ: CSCO) is the number one security hardware vendor. Big business has made it abundantly clear that security is a top priority now and going forward. With Fortune 500 companies getting hacked and thousands upon thousands of customers having vital data compromised, this does not look like it will change anytime soon. Investors are paid a solid 3.1% dividend. Cisco is rated a Buy at Merrill Lynch, which has a $28 target. The consensus estimate is at $25.01. Cisco closed Friday at $24.52.
Freeport-McMoran Copper & Gold Inc. (NYSE: FCX) was battered last year as investors fled mining companies. Some Wall Street firms see copper prices continuing to rise, and demand from China could also continue to grow as a huge theme. The company has also entering the U.S. oil and gas space, and recently announced a $1.4 billion buy for deepwater assets in the Gulf of Mexico. Overall global growth also may provide a tailwind for the stock, which trades at a low 13.85 times trailing earnings. Investors are paid a 3.6% dividend. Merrill Lynch has a $43 price target, and the consensus is posted at $39.56. The stock closed Friday at $34.43.
General Electric Co. (NYSE: GE) has lagged the rally over the past year, and it may provide investors a solid entry point. The company continues to expand its investment into energy, committing $10 billion to its “ecomagination” budget through 2020. GE plans to use the initiative to develop alternative technologies to replace water in the hydraulic fracturing process. With water shortages in places all across the United States, energy companies are looking for ways to cut back on water use. The iconic industrial trades at a low 15 times forward earnings. Investors are paid a very solid 3.3% dividend from the blue chip name. The Merrill Lynch price target is $29. The consensus target is $28.90. GE closed Friday at $26.51.
KLA-Tencor Corp. (NASDAQ: KLAC) is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. With a portfolio of industry standard products and a team of world-class engineers and scientists, the company has created superior solutions for its customers for more than 35 years. Investors are paid a 2.8% dividend. The Merrill Lynch price target is $75, and the consensus is placed at $68.11. KLAC closed Friday at $64.18.
MetLife Inc. (NYSE: MET) is a top insurance stock that trades at a low 8.9 times forward earnings. The company is a leading global provider of insurance, annuities and employee benefit programs. MetLife holds leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. Investors are paid a 2.8% dividend. Merrill Lynch has a $67 price target for the stock, which is a top name on the firm’s US 1 list. The consensus target is $60.24. MetLife closed Friday at $50.76.
National Oilwell Varco Inc. (NYSE: NOV) is one the top energy stocks to buy at Merrill Lynch and many other Wall Street firms that we cover. The company recently announced an increase in its quarterly cash dividend to $0.46 per share ($1.84 annualized), up almost 77% from $0.26. The new dividend will be paid on June 27 to shareholders of record as of June 13, and it equals a yearly 2.2% payout. The company also announced earlier this year a record backlog of business that stood at a stunning $13.95 billion. Merrill Lynch has an $87 price target, and the consensus target is $89.81. The stock closed Friday at $81.90.
Not only are the top inexpensive cyclical stocks to buy at Merrill Lynch big solid blue chips, they are names that investors for the most part can buy and put away for the long term. With many of the Wall Street firms we cover leaning toward large-cap names for the rest of the year, the Merrill Lynch stocks should be good portfolio additions now, even with the market hovering near record highs.