While Thursday’s rally was a very welcome sight, and Friday could be even better, the problems that were shaking the market are still looming right in the background. With no final verdict in Greece, and the Chinese market possibly poised for another leg down, it makes sense for investors to stay on guard.
In a new research report from Cowen, they did a quick poll of their analysts for top defensive stocks to buy now. The analysts ideas have high free cash flow, a high dividend yield or a low price-to-earnings (P/E) multiple. We scanned the list for stocks in various sectors that make the most sense in a dangerous world. All four are rated Outperform at Cowen.
Amgen posted outstanding first-quarter earnings and the biotech giant remains a top stock for investors to buy. Amgen Inc. (NASDAQ: AMGN) reported first-quarter 2015 earnings of $2.48 per share, soaring above the consensus estimate of $2.07 and the year-ago earnings of $1.86. Total revenues increased 11.3% to $5,033 million in the first quarter, and the stellar earnings were driven by higher revenues and lower operating expenses.
Many on Wall Street point to the company’s tremendous pipeline and outstanding forward earnings and revenue capabilities. Amgen’s double-digit earnings and revenue growth rate is expected to continue for the foreseeable future because of the company’s very deep clinical pipeline, which include potential blockbusters Repatha for high cholesterol and Kyprolis for relapsed multiple myeloma. Amgen also has one of the industry’s deepest biosimilar pipelines, which is expected to generate upward of $3 billion in annual sales in the years ahead.
Amgen continues to trim its gigantic workforce as it bows to activist hedge fund shareholders. One of them is hedge fund manager Dan Loeb, whose Third Point has raised its stake in Amgen to $1.7 billion. Loeb has been pushing the biotech giant to split into two separate companies to boost shareholder value.
Amgen shareholders are paid a solid 2.07% dividend. The Cowen price target for the stock is $189, and the Thomson/First Call consensus target price is $179.47. Shares closed Thursday at $151.31.
This is the top mega-cap technology stock pick on Wall Street and perhaps another surprising defensive pick. Cisco Systems Inc. (NASDAQ: CSCO) is trading at a low 12.4 estimated 2015 earnings and boasts an outstanding 7.44% free cash flow yield. The networking giant also seems to have fought through numerous headwinds, including up and down demand from telecom carriers, weakness in emerging markets and threats to its very lucrative switching business. Cisco is also one of the 24/7 Wall St. top 10 stocks to own for the next decade.
Cisco earlier this year won an important contract for the Verizon build out of the company’s next-generation 100G metro network. While Cisco’s optical business is small as a part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.
Analysts across Wall Street point to an estimated double-digit bookings momentum for Cisco’s Meraki Cloud Services. Many think that Meraki is likely to be a $1 billion or more run-rate business this year, with an incredible 50% to 70% compounded annual growth rate. A jump from 40 GE to 100 GE data center switching and next generation security are also adding to the total sales profile and product mix.
Cisco investors are paid a very solid 3.12% dividend. The Cowen price target is $37, and the consensus target is $31.45. Shares closed Thursday at $26.91,
This budget retailer always tends to do well in good times or bad. The TJX Companies Inc. (NYSE: TJX) is a top stock for investors looking for a consumer discretionary position that is more conservative. The stock is an ideal long-term portfolio holding, as it is the low price leader in retail and still has many customers who shop for bargains. Growing online sales and increased store traffic may bode well as the company refocused efforts over the past couple of years to increase and enhance the online presence.
The company operates its stores under the T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx and Sierra Trading Post banners. They are well represented in almost all the top markets in the United States and have an outstanding overall retail footprint.
TJX investors are paid a 1.25% dividend. The Cowen price target is set at $80, and the consensus target is $74.79. Shares closed Thursday at $67.67.
In this case, the Cowen team is higher that Wall Street estimates for 2015 earnings. Valero Energy Corp. (NYSE: VLO) has 56% of companywide refining capacity located in the U.S. Gulf Coast, which makes Valero well positioned to benefit from the ongoing infrastructure debottlenecking of inland crude oil supply in 2015 and beyond. Some Wall Street estimates have the company generating an astounding free cash flow compounded annual growth rate of 24% during the period from now to 2016.
The Cowen team is very bullish on the big pile of cash the company has, and they are especially interested in possible mergers and acquisition activity in both refining and midstream assets. The analysts are also very positive on Valero’s ability to beat second-quarter earnings estimates when it reports on July 30.
Valero investors are paid a 2.5% dividend. The Cowen price target of $70 is lower than the $72.62 consensus objective. The stock closed Thursday at $64.11.
None of these stocks are on the momentum traders’ radar, and that is exactly what prudent growth investors need now. The good thing is they all pay solid dividends and have an outstanding potential for growth, especially when market volatility simmers back down.
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