For the most part, unless you were way over-weighted to energy, large cap and mega cap stocks did reasonably well for investors this year. At the end of 2014 Savita Subramanian and her top notch staff at Merrill Lynch put out a report that noted that S&P 500 stocks that were the most underweighted by fund managers outperformed the stocks managers were overweighted in portfolios.
We decided to screen the list of Big,Old and Ugly stocks from December that were prominent in the research report to see which of the 23 look poised to have a solid rest of 2015. The stocks from that list continue to have Buy ratings and upside targets at Merrill Lynch and they have upside to the consensus analyst price target as well.
This company posted solid second quarter numbers last week. AT&T Inc. (NYSE: T) has to be one of the most ignored dividend plays on Wall Street. In fact, AT&T is the 3rd most underweighted security, and the most under owned by active fund managers according to Merrill Lynch data. While growth has been admittedly slower over the last few years, the company continues to expand their user base, and strong product introductions from smartphone vendors has not only driven traffic, but increased device financing plans. An area that many on Wall Street believe could lead to some earnings weakness.
Many on Wall Street think that finally closing the DIRECTV deal will remove a lot of lingering questions, especially where the company’s big dividend is concerned. It’s a good bet that the synergies created by the deal are being underestimated by Wall Street. And many analysts see upside to wireless margins which were a positive earnings driver in the second quarter.
AT&T investors are paid an outstanding 5.40% dividend. The Merrill Lynch price target is set at $40, and the Thomson/First Call consensus estimate is at $37.17. Shares closed Thursday at $34.80 up just over 3% for 2015.
Ford Motor Company
The stock made the Merrill Lynch list and is essentially flat for the year. Ford Motor Co. (NYSE: F) has reshaped the company’s product line in recent years, and sales have been outstanding. With sales booming not only here in the U.S., but in China, and six new models being introduced in Russia this, the company is expanding market share, while maintaining a competitive pricing structure. The company posted outstanding earnings for the second quarter and the analysts expect a strong second half of 2015.
The iconic F-150 trick remains the top selling truck in America, and has been the top selling vehicle for the last 33 years, despite strong challenges from the competition. We recently highlighted the truck in a story that detailed safety and repair expense.
Ford investors are paid a very solid 4% dividend. The Merrill Lynch price target for the stock is $18. The Thomson/First Call consensus target for the stock is posted at $17.41. Shares close yesterday at $15.10.
This leading energy company is the world’s largest international integrated oil and gas company and reported the worst numbers the company has put out since 2009. Exxon Mobil Corporation (NYSE: XOM) is an energy sector play that the Merrill Lynch analysts are very positive on long-term as the overall corporate strength of the massive integrated giant plays a significant part in the company’s usually solid earnings reporting pattern.
The Merrill Lynch team has stressed in the past the company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that many others on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Some very solid reasons for adding the stock to a long-term growth portfolio is the fact that the company has consistently demonstrated disciplined investing, operational excellence and technological innovation. With the stock now trading at the lowest level since 2011, true value investors may be taking a long hard look at adding shares. Plus, for those looking for income, even with poor earnings, the dividend still looks safe.
Exxon investors are paid a very respectable 3.64% dividend. The Merrill Lynch target for the energy giant is $106. The consensus price objective is lower at $92.18. Shares closed trading on Thursday at $83.01, down over 10% for the year.
This is a stock that could be offering investors one of the best values at current trading levels. Pfizer Inc. (NYSE: PFE) rocked Wall Street this year announcing a gigantic $15.2 billion purchase of Hospira. Hospira shareholders will be paid $90 a share. Hospira is a top provider of sterile injectable drugs –including those used for acute care and cancer treatment — infusion technologies and biosimilars, which are subsequent versions of drugs whose patents have expired. In other recent solid news for Pfizer, the company’s drug Ibrance was approved for advanced breast cancer by U.S. regulators more than two months ahead of schedule, letting the drugmaker proceed with one of its most promising new blockbusters, a turn-of-events that Wall Street likes.
With a strong pipeline and the fact that Pfizer is the world’s largest drug manufacturer by sales value, many analysts feel the company can generate higher long term revenues through the accelerated growth of its new drugs over the next five years with Ibrance leading the way.
Pfizer investors are paid a solid 3.13% dividend. The Merrill Lynch price target for the stock is set at $36. The consensus price target for the stock is posted higher at $37.17. Pfizer closed Thursday at $35.73. While the stock is up 15% this year it has traded sideways since February.
Yep, big, old and ugly, and one other thing, safe. With a very pricey market, and rates set to rise either in September or December, owning large cap leaders that are ignored by many active managers makes very good sense for long-term growth investors.