Merrill Lynch Has 5 Stocks to Buy With Big Upcoming Catalysts

March 12, 2015 by Lee Jackson

Two things are often the key to moving a stock price. One is obviously earnings, but a second and equally important is a company with a big upcoming catalyst. A new research report from Merrill Lynch focuses on the stocks in the firm’s SMID-Cap Alpha list of stocks to buy. The analysts have screened the list for stocks that will have an event in the next few months that could be big market movers.

The Merrill Lynch SMID-Cap Alpha list is made up of small and mid-cap stocks that the company views as the best picks for clients now. The market capitalization of the stocks can run up to $7 billion. Here are the five stocks on the list we found that have some big news and events that may be right around the corner: American Axle & Manufacturing Holdings Inc. (NYSE: AXL), Booz Allen Hamilton Holding Corp. (NYSE: BAH), Dyax Corp. (NASDAQ: DYAX), Restoration Hardware Holdings Inc. (NYSE: RH) and Take-Two Interactive Software Inc. (NASDAQ: TTWO). All are rated Buy at Merrill Lynch.

American Axle & Manufacturing

Outstanding fourth-quarter numbers suggests it may be on the path for a very solid 2015. The company has benefited from the demand for auto parts, and the Merrill Lynch team thinks pent-up demand has yet to be fully realized. The firm also sees expanding diversification in the company’s customer base, which could make 2015 earnings and free cash flow strong. It may be a very solid stock to buy before the first-quarter report.

The Merrill Lynch price target for the stock is $29. The Thomson/First Call consensus price target is $25. Shares closed Wednesday at $24.64.

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Booz Allen Hamilton

This is a leading provider of management consulting, technology and engineering services to the U.S. government in defense, intelligence and civil markets, and to major corporations and not-for-profit organizations. The Merrill Lynch team sees the company using its cash stockpile for acquisitions, and it sees the possibility for increased dividend payouts. The analysts also think cybersecurity could also become a major priority for U.S. commercial companies.

Booz Allen shareholders are currently paid a 1.8% dividend. Merrill Lynch puts a $35 price target on the stock, while the consensus target is $32.33. The stock closed trading on Wednesday at $28.62 a share.

Dyax

This fully integrated biopharmaceutical company is focused on the discovery, development and commercialization of novel biotherapeutics for unmet medical needs. It currently markets Kalbitor (ecallantide) for the treatment of acute attacks of hereditary angioedema (HAE) in patients 12 years of age and older. Dyax is also developing DX-2930 for the prophylactic treatment of HAE.

The Merrill Lynch team notes that patient accrual is ongoing for the Phase 1b trial for DX-2930 for prophylaxis of HAE with better visibility on DX-2930’s impact on attack frequency in early 2015. Results from 25 physician survey could favor DX-2930 over other current and pipeline options, which could have a big impact on the stock. HAE is a very rare and potentially life-threatening genetic condition that occurs in about one in 10,000 to one in 50,000 people.

Merrill Lynch has a $16 price target, and the consensus figure is $17.06. Shares ended trading Wednesday at $16.42.

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Restoration Hardware

This stock has been a momentum trader’s dream since coming back from private equity just over two years ago. The company is a high-brow retailer of home furnishings. Its product categories include furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware and children’s furnishings. The analysts see the company expanding the product line, with the kitchen being the big launch this year.

Restoration Hardware is also expanding the next-generation store galleries in a bigger format. As of the last report, Restoration Hardware operated 70 retail stores, consisting of 62 Galleries, five full line Design Galleries and three Baby & Child Galleries, as well as 17 outlet stores in the United States and Canada.

While the Merrill Lynch price target is $110, the consensus target is lower at $100.38. Shares closed Wednesday at $88.66 apiece.

Take-Two Interactive Software

This top video game producer has cashed in with some super-hot titles. It offers its products under such labels as Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club and Red Dead under the Rockstar Games label. The Grand Theft Auto franchise has been one of the best-selling video games ever released.

The Merrill Lynch team see the potential for a new Rockstar title, and the already confirmed Battleborn, NBA 2K, WWE 2K and Civilization Online for the company’s 2016 fiscal year, as being solid catalysts for the stock.

Merrill Lynch’s price target for the stock is $36, and the consensus target is $33.56. The stock closed trading on Wednesday at $24.42.

ALSO READ: 4 Top Pharmaceutical Stocks to Buy for Market Safety

While not necessarily earthshaking, all the catalysts the analysts outline can add to the already positive metrics these top companies to buy already are exhibiting. Plus, any positive news flow and product announcements can keep the stock is front of potential new investors.

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