While virtually all the top Wall Street firms that we cover have a list of top picks, most of them have a longer and more conservative time-frame tagged to those picks, which is prudent for long-term investors. The Bank of America Merrill Lynch top 10 U.S. quarterly ideas are built around data and events that will happen in the first quarter of 2015. The Merrill Lynch team actually posts a calendar of the first three months, and updates the calendar with specific days that stocks on the list could have an actionable event. These range from actual earnings events to Supreme Court hearings and bank stress tests results.
In the newest report, the team updates the calendar and comments on earnings and new events. The actual stocks rated Buy at the firm on the list are eight top companies. We scanned the eight for events in the last half of the first quarter that could be meaningful.
Citigroup Inc. (NYSE: C) leads off the list at Merrill Lynch. The analysts feel that the large-cap money center giant will surpass expectations in the first quarter as it “passes” the Federal Reserve’s Comprehensive Capital Analysis and Review and winds down capital dedicated to Citi Holdings and sells or spins off the bank’s subprime lending business. These catalysts, combined with the bank’s strong domestic and international business, make it a solid buy for investors. The Fed has announced that the data on the bank’s stress test would be released on March 11.
Citigroup shareholders are paid a minuscule 0.1% dividend. The Merrill Lynch price target for the stock is $65. The Thomson/First Call consensus price target is at $60.63. Shares closed on Thursday at $50.89.
Community Health Systems Inc. (NYSE: CYH) is a top idea for the first quarter and also on the Merrill Lynch US 1 for 2015. The main thesis is predicated on coverage expansion under ACA reform providing a substantial boost in 2015 and beyond and a large asset base providing geographic diversification and scale advantages. Merrill Lynch team sees it as one of the most levered to the states where Medicaid expansion could be the greatest. The analysts point to earnings for the company next week on Thursday, which they are above Wall Street estimates. They also expect health care exchange enrollment data to be released next week as well.
The Merrill Lynch price target is $72. The consensus price objective is much lower at $62.39. Shares closed Thursday at $47.22.
Kraft Foods Group Inc. (NASDAQ: KRFT) reported outstanding results this week, but benefit plan costs are proving to be challenging for the iconic food company. The Merrill Lynch team says they believe Kraft could warrant a premium multiple, given the potential for strong earnings growth over the next several years, and they are above Wall Street consensus for fourth-quarter earnings. The analysts also cite the chairman of the company taking over as CEO and additional share repurchases as additional positives for the food giant.
Kraft shareholders are paid a very attractive 3.6% dividend. The Merrill Lynch price target is $68, and the consensus target is $59.71. The stock closed trading Thursday at $66.17, but shares trading down in premarket action Friday.
Qorvo Inc. (NASDAQ: QRVO) is the new company name after the merger of RF Micro Devices and TriQuint Semiconductor, and the stock started trading under the new symbol in early January. The company reported outstanding earnings that were ahead of Wall Street and the Merrill Lynch estimates, and the analysts said that investors should shrug off the undue sell-off and buy shares now. While the first-quarter sales outlook was ahead of consensus, the number is down 16% year-over-year, and that may have spooked shareholders, as the stock was sold off a quick 20%.
The Merrill Lynch price objective for the stock is $82, and the consensus target has not been posted as of yet. The shares closed trading on Thursday at $66.20.
With an eye on the calendar, and events that could move these stocks, the Merrill Lynch top quarterly idea list is a good source of ideas for traders or long-term accounts.