Oppenheimer Triple Play Sector Swap Ideas for Third Quarter

Cytec Industries Inc. (NYSE: CYT) gets the nod as the swap idea in the materials sector over industry giant DuPont. The company is a global specialty chemicals and materials company that Oaktree Capital Management founder Howard Marks just bought a 5.5% stake in. Other prominent portfolio managers are also very positive on the stock as well. Investors are paid a small 0.5% dividend. The consensus price target is $107.73 Cytec opened Monday at $104.78.

Humana Inc. (NYSE: HUM) is a top swap candidate at Oppenheimer in health care, and the analysts say to consider it if you currently own Cerner. Humana has a unique earnings profile and is the closest thing in the space to a Medicare Advantage pure play with about 60% of operating earnings levered to this segment and a strong market position. Future growth should come from a combination of baby boomers (turning 65 at the rate of 8,000 per day for the next 18 years) and continued market share gains and potential shifts from employers to Medicare. Investors are paid a 0.9% dividend. The consensus target is pegged at $124.40, but Humana started the week at $129.90.

Sensata Technologies Holding N.V. (NYSE: ST) is a global industrial technology company, and a leader in the development, manufacture and sale of sensors and controls. The Oppenheimer analysts suggest swapping it for Generac Holdings. They think that the company will de-lever its balance sheet using its strong projected cash flow. Lowering the debt service could make for stronger earnings in coming quarters. The consensus target price is $48.91. Sensata opened Monday at $47.42.

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Highwoods Properties Inc. (NYSE: HIW) is a suggested swap in financials from Fifth Third Bancorp. The fully-integrated real estate investment trust (REIT) owns, develops, acquires, leases and manages properties primarily in the best business districts of Atlanta, Kansas City, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond, Tampa and the Triad. Investors are paid a very solid 4% distribution. The consensus price target is $41.11, but shares started trading Monday at $41.74.

Juniper Networks Inc. (NYSE: JNPR) is a swap idea in technology, where the Oppenheimer teams says to move from Concur Technologies. Juniper Networks’ recent large layoff will dent the balance sheet as it is expected to pay more than $35 million in severance as 6% of its workforce is expected to depart. Positive activist shareholder moves combined with a solid product cycle have made the stock a favorite on Wall Street, and its big presence in network and enterprise security has drawn key portfolio managers to the stock. By vendor, Juniper posted the strongest year-over-year growth at 38.7% in the key switching market in 2013. The consensus price target is $28.91. Juniper started the week at $24.75.

Swapping out stocks that are starting to tire after a long market rally makes very good sense for investors with long-term investment horizons. While the market may be ripe for a fall sell-off, the domestic and world economies are starting to perk up, and that may bode well for the future.

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