You can feel it every day, this market is getting tired. While the global macro picture has gotten better, and earnings have been mostly solid for the quarter, tech misses notwithstanding, the uphill struggle seems evident. This is the perfect time for aggressive growth investors to look to value stocks for a rotation. A new report from Jefferies highlights five top picks for this week.
Value does not mean upside is capped. It means that on a price and valuation basis, the odds may be stacked a little more in your favor. All five of these stocks are rated Buy at Jefferies and have more than a touch of a contrarian play attached to them.
This stock is very solid story for investors looking to stay long or enter the energy sector. Chevron Corp. (NYSE: CVX) sports a sizable dividend, and has a solid place in the sector when it comes to natural gas and liquefied natural gas. Some Wall Street analysts estimate the company will have a compound annual growth rate of over 5% for the next five years, and the stock trades at a modest valuation discount to some of its mega-cap peers.
Chevron management is aggressively pursuing cost saving initiatives, and has already completed over 2,200 supplier engagements with 700 more in progress. Cost savings and improving investor sentiment may be a key for the mega-cap integrated as it has struggled mightily over the last year. The Jefferies team concedes that the oil market could be oversupplied for longer than most thought, but they do see crude rallying from here, and they expect more solid improvement after this quarter.
Chevron is a company focused on current major projects, and probably not in the market for a major deal at this time, so cash levels and debt on the books should stay consistent.
Chevron investors are paid a large 4.61% dividend. The Jefferies price target for the stock is $125. The Thomson/First Call consensus target is $110.70. Shares closed Tuesday at $93.90.