Merrill Lynch Makes 3 Key Changes to US 1 List in Oil and REITs

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Many firms have their own version of a “focus list” of top Buy-rated stocks for their clients. The Merrill Lynch US 1 List is effectively the same thing as the Conviction Buy List from Goldman Sachs. Now we have seen three changes made to the US 1 List.

Merrill Lynch sees its US 1 list as representing a collection of its best investment ideas drawn from its universe of stocks with Buy ratings. It includes U.S.-listed companies and American depositary shares that are covered by the Bank of America Merrill Lynch team of fundamental equity research analysts, and its picks are managed with a goal of providing superior investment performance over the long term. Here are Tuesday’s three changes to the Merrill Lynch US 1 List.

Simon Property Group Inc. (NYSE: SPG) was added to the US 1 list, while General Growth Properties (NYSE: GGP) was removed. Merrill Lynch said that the firm is making an adjustment based on the overall composition of the list. Occidental Petroleum Corp. (NYSE: OXY) was also removed from the US 1 list. Despite Occidental and General Growth Properties being ejected from the US 1 list, both stocks were maintained as Buy at the firm.

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A quick look was made to see the price objective from the firm’s fundamental analysts. Simon Property targets 9% average returns and is targeting premium outlet store locations for high-quality and high-traffic properties. Simon’s price objective was $223.00, versus a pre-call closing price of $191.81. On the General Growth removal, Merrill Lynch still has a $33.00 price objective (versus a $27.08 prior close) and the firm said:

We maintain our Buy rating on General Growth Properties, which we believe still retains an above-average growth profile. General Growth is expecting a stronger second half of 2015, driven in part by redevelopments opening in the second half. Given uncertainty regarding the economy, we believe there will be a flight to safety and prefer Simon’s exposure to premium outlets.

Simon Property has a yield of 3.3%. At $192.70, it has a 52-week trading range of $164.13 to $206.31 and a consensus analyst price target of $217.68.

General Growth has a yield of 2.7%, and its current price of $26.91 is against a 52-week range of $23.38 to $31.70. The real estate investment trust (REIT) also has a consensus analyst price target of about $32.50.

While few specifics were put out fresh on Occidental, Merrill Lynch said that the move is following the expiration of its 12-month term on the list. A prior report from Merrill Lynch suggested that Occidental was a bias pick with a $95.00 price objective. That is versus a prior $70/65 close and a 52-week range of $63.60 to $92.62. Occidental yields more than 4%.

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