Investing

4 Stocks to Buy With Potentially Big Upcoming Catalysts

If there is one thing that is sure to move a stock, it is an upcoming catalyst that turns out to be positive. Sometimes it is earnings, and sometimes it can be anything from an accretive acquisition to a stock split to a resolution of legal issues. In a new report, Bank of America Merrill Lynch spots some upcoming catalysts for some of the top ranked Smid-Cap Alpha list of stocks to buy.

We screened the Merrill Lynch list looking for the stocks with the biggest upside to the posted target prices, that also had positive upcoming catalysts that could move the share prices.

Booz Allen Hamilton

This company just scored a major defense contract. Booz Allen Hamilton Holding Corp. (NYSE: BAH) 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 the firm’s cash stockpile for acquisitions, and it sees the possibility for increased dividend payouts.

The Merrill Lynch team also sees the potential for additional growth at the company through potential acquisitions. With cybersecurity also becoming a major priority for U.S. commercial companies, Booz Allen could benefit there as well.

Booz Allen shareholders are currently paid a 1.98% dividend. Merrill Lynch puts a $30 price target on the stock, while the Thomson/First Call consensus price target is $29.90. Shares closed trading on Wednesday at $26.27.

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Restoration Hardware

This company has been a momentum trader’s dream since coming back from private equity with an initial public offering just over two years ago. Restoration Hardware Holdings Inc. (NYSE: RH) 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 product lines, with the kitchen being the big launch this year. It is also expanding the next generation store galleries in a bigger format.

The company recently completed the pricing of $250 million of 0% convertible senior notes due 2020 at a 25% conversion premium to where the stock priced. Restoration Hardware intends to use this additional capital to fund business initiatives, including the expansion of its business and the pursuit of additional growth opportunities. These are all things that the analysts are excited about.

The Merrill Lynch price target is $110, and the consensus target is set at $107.75. The stock closed Wednesday at $96.07 per share.

SunPower

This company is adding capacity at a breakneck pace. SunPower Corp. (NASDAQ: SPWR) and First Solar recently completed plans to jointly form a publicly traded yield company by bringing 8point3 Energy Partners public. Some on Wall Street feel this may make both companies a combined takeover target.

SunPower offers solar power products, including panels, balance of system components and inverters. It also designs, manufactures and sells high-performance rooftop and ground-mounted solar power systems, as well as utility-scale photovoltaic power plants. In addition, the company offers operations and maintenance services, including remote monitoring, preventative and corrective maintenance services, as well as rapid-response outage restoration and inverter repair services.

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The Merrill Lynch team noted that company management expects to add significant production capacity, including a new 800 megawatt fab that will target 25% cell efficiency. They feel this will allow the company to leverage the high-efficiency technology and low-cost financing to expand on projects around the world.

The Merrill Lynch price objective is $42, while the consensus target is $41.08. The stock closed trading on Wednesday at $31.50.

WisdomTree Investments

This company is the real up-and-comer in the exchange traded fund (ETF) business, and it is carving itself out an outstanding share with many specialized ETF offerings. Wisdom Tree Investments Inc. (NASDAQ: WETF) continues to benefit from the movement toward ETFs. This is especially true with the specialized currency hedged products, with the potential for significant uptake in interest rate hedged products.

Wisdom Tree is run by Jonathan Steinberg, the son of famous Wall Street financier Saul Steinberg. He is also married to Maria Bartiromo who became very famous on CNBC and now works for the Fox Business Network. Steinberg has a long and very distinguished ETF background, going back to the product’s infancy.

The Merrill Lynch team cites the strong inflows, the company’s solid position in currency hedging and the overall trend in the market for use of ETFs as positives going forward.

Wisdom Tree investors are paid a 1.40% divided. The Merrill Lynch price target is posted at $25, and the consensus figure is at $25.31. Shares closed Wednesday at $22.95.

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Small-cap and mid-cap stocks have been on a roll, and these four companies look like they can continue their winning ways. While not necessarily earthshaking, all the positive catalysts the analysts outline can add to the already solid metrics these top companies to buy are exhibiting already. Plus any positive news flow and product announcements can keep the stock is front of potential new investors.

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