Investing

3 Favorite Stock Picks for 2016 From Top Cowen Analysts

Harris

This top defense sector play is way cheaper than peers and could be an outstanding buy at current levels. Harris Corp. (NYSE: HRS) provides technology-based solutions that solve government and commercial customers’ mission-critical challenges. The company designs, develops and manufactures a line of secure radio communications products and systems for manpack, handheld, vehicular, airborne, strategic fixed-site and shipboard installations that span the communications architecture from high-capacity line of site, backbone radios, small soldier personal radios and tablet computers, as well as offers assured communications systems and equipment, including Internet Protocol based voice and data communications systems.

Cowen notes that the defense sector is very positive with solid sentiment reading, and the group historically outperforms in presidential election years, noting that 2016 candidates likely will remain hawkish in the wake of recent elevated domestic threats. Plus it trades at a 10% discount on 2016 estimates earnings to company’s peers in the industry. Most importantly, in a sector that for the most part is overbought and fully valued, Harris offers one of the only true bargains.

The Cowen price target jumps to $102 from $88, while the consensus target is $95. The stock closed on Tuesday at $84.27.

Spirit Airlines

This ultra-low-cost carrier sold off big from the springtime highs and is offering investors the best entry point in a year. Spirit Airlines Inc. (NASDAQ: SAVE) was named by Air Transport World as the Value Airline of the Year at the 41st Annual Industry Achievement Awards ceremony earlier this year. The carrier’s super-low prices, which are way below industry standard, allow customers to pay up to choose additional amenities.

Spirit has seen a 40% growth in customer satisfaction, according to internal surveys. This growth has also led to Spirit being included in the Department of Transportation’s monthly Air Travel Consumer Report beginning this year. While the absolutely no-frills airline is not for everyone, it has a loyal customer following, which continues to grow.

Cowen analyst Helane Becker is one of the best in the sector on Wall Street, and she notes that fares have bottomed in Chicago and Dallas, where the company has over 15% of its capacity. She also notes that the forward price-to-earnings multiple shrunk 32% this year, and the stock now trades at a low 10.7 times forward earnings estimates, versus a historical 12.7 times, and a high in 2014 of just under 20 times.

The Cowen price target is raised to $55 from $50, and the consensus target is right in line at $55.25. The stock closed Tuesday at $40.74.


All these new top 2016 picks offer growth investors some solid upside potential. While there is no reason to think 2016 is a blockbuster up year for the markets, we should see mid to high single-digit gains, and stock picking will likely be at a premium.