5 Merrill Lynch Stock Picks That Have Been Hurt by Strong Dollar

With the U.S. dollar the strongest in years, some top stocks have taken it on the chin in 2015 as a result. The dollar is up 8% this year and a whopping 20% since the end of last June. A new report from Merrill Lynch shows that there is a trove of quality multinational large caps that have been hit hard due to perceived dollar exposure that should be bought.

Merrill Lynch top-notch strategist Savita Subramanian and her team think there is opportunity in buying high-quality multinationals. They point out that with European growth gaining momentum, multinationals should fare better. The analysts screened the top stocks that have underperformed in 2015, each are high quality companies with low correlations to the dollar.

24/7 Wall St. picked the five stocks on the Merrill Lynch screen with the largest year-to-date underperformance. They are Hewlett-Packard Co. (NYSE: HPQ), Kansas City Southern (NYSE: KSU), Intel Corp. (NASDAQ: INTC), F5 Networks Inc. (NASDAQ: FFIV) and Procter & Gamble Co. (NYSE: PG).


HP is down a whopping 22% year to date and trades at a very low 8.6 times 2015 estimated earnings. Some Wall Street analysts feel that weak personal computer (PC) demand could continue to negatively affect revenue and free-cash-flow at the company. The recent decline in the stock may represent investors already discounting a weak first quarter from the Silicon Valley icon. HP does a large 65% of sales to foreign accounts.

ALSO READ: 6 RBC Top Tech Stocks to Buy Ahead of Earnings

The server business is where many top analysts on Wall Street are bullish, and by adding in the firm’s very solid printer business, investors may be well-advised to look at this stock’s at current lower trading levels.

HP investors are paid a 2.05% dividend. Merrill Lynch has a very solid $42 price target for the stock. The Thomson/First Call consensus price target is $40.40. Shares closed Wednesday at $31.52.

Kansas City Southern

This top transport stock is down a big 15.6% so far this year, and it does a surprising 46% of sales to foreign customers. The company has railroad investments in the United States, Mexico and Panama. Its primary U.S. holding is the Kansas City Southern Railway Company, serving the central and south central United States. Its international holdings include Kansas City Southern de Mexico, serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, as well as a 50% interest in Panama Canal Railway Company, providing ocean-to-ocean freight and passenger service along the Panama Canal.

Kansas City Southern’s North American rail holdings and strategic alliances are primary components of a NAFTA Railway system, linking the commercial and industrial centers of the United States, Mexico and Canada.

Kansas City Southern investors are paid a 1.3% dividend. Merrill Lynch has a $118 price objective, and the consensus target is $117.33. Shares closed trading on Wednesday at $104.95.

ALSO READ: 4 Big Pharmaceutical Stocks to Buy for the Rest of 2015

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