If there has been a year that has been difficult to trade, it has been 2015. With the S&P 500 trading at about the same level it was at last November, and the lack of a 10% correction in over three years, some top stocks took it on the chin hard this year after being up big just months ago.
24/7 Wall St. wanted to revisit former high-flyers and sector leaders and see which ones look like solid buys in a market that is pricey, tired and wary of rate increases. We found four that warrant being revisited now for some potential big gains down the road.
This semiconductor capital equipment leader has lagged the overall tech market over the past year. Applied Materials Inc. (NASDAQ: AMAT) is actually now trading below all the moving averages, and for patient investors may be a high-quality pick now. Applied Materials is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Its technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.
Merrill Lynch analysts are very positive on the stock and see it benefiting not only from the semiconductor side of the business, but also the larger, higher resolution and flexible screens on the display side of the business. Many on Wall Street were disappointed when the merger with Tokyo Electron was called off earlier this year, and the Merrill Lynch team points out the stock has been out of favor ever since.
The company will report third-quarter earnings on Thursday, and most analysts are cautiously optimistic. Merrill Lynch recently pointed to the analysts day at Semicon West and commentary from peers on the robust chip cycle as upcoming very positive catalysts. The firm also sees the stock as a big restructuring story, at a very cheap bargain basement prices.
Applied Materials investors are paid a 2.31% dividend. The Merrill Lynch price target for the stock is $26. The Thomson/First Call consensus price target is at $23.67. Shares closed Tuesday at $17.34.
This company continues to expand routes and remains a low-cost leader. Southwest Airlines Inc. (NYSE: LUV) continues to increase its brand awareness all over the country. With the domestic market showing reasonably good strength, and the pricing environment looking very solid for the rest of 2015, revenues should stay strong and continue to grow. Jet fuel prices that remain much lower than in past years and are almost 30% of Southwest’s total costs have been a key for improving revenues and earnings. With almost no international business at this time, currency headwinds are not an issue for the airline.
CEO Gary Kelly recently said:
Our available seat-mile growth will be a little bit more than our seat growth, but it will be around 7 percent for this year; and likewise we will manage aggressively to the low end of that range for next year. Much of the growth in 2016 is simply carryover from 2015.
This has been a concern for some investors and probably relieves some anxiety of overcapacity.
Southwest shareholders are paid a 0.8% dividend. The UBS price target is $46, and the consensus target is higher at $49.71 The stock closed most recently at $38.36.
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