With the market hitting a wall this week, many investors may be looking at their portfolios and wondering if it isn’t time to make some year-end moves. Dividend stocks have suffered this year, and most of the positive upside in the S&P 500 has come from three momentum stocks.
Each week we cover the new value calls from the analysts at Jefferies, and increasingly some of the calls may look surprising as some solid, blue chip companies are becoming so cheap on a multiple basis they are ending up in the value arena. This is the best of both worlds for investors, when large cap growth companies become inexpensive enough to have a value call.
Here are four of this week’s value stocks to buy from Jefferies. All are rated Buy.
This company posted very solid third-quarter numbers, and many on Wall Street think the fourth quarter will be good as well. AT&T Inc. (NYSE: T), the world’s largest provider of pay-TV, has TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
Trading at a very cheap 11.7 times estimated 2016 earnings, AT&T continues to expand its user base, and strong product introductions from smartphone vendors has not only driven traffic but increased device financing plans.
The outstanding third-quarter results were accompanied by reiterated 2015 guidance for double-digit revenue growth and continued consolidated margin expansion. Management expects capital spending to increase sequentially and they also estimate that free cash flow could be better than $4.5 billion. Third-quarter wireless subscriber additions came in higher than many Wall Street estimates, and DirecTV saw positive video additions where many expected losses.
AT&T investors receive an outstanding 5.55% dividend. The Jefferies price target for the stock is $40, and the Thomson/First Call consensus price target is $37.12. Shares closed Tuesday at $33.85.
This is the Jefferies team’s top pick for the holiday season. Best Buy Inc. (NYSE: BBY) has become the retail rags-to-riches story over the past three years as it not only have survived, but most of the big-box retail competition has gone to the graveyard as Best Buy has grown its brand smartly. The company continues to combat challenging conditions by reducing costs, pricing competitively, optimizing stores and enhancing distribution. The store-within-store partnerships it has with suppliers like Samsung, Apple and Google continue to drive more store traffic and product sales. Best Buy’s online channel growth also looks very promising, as it continues to battle Amazon.
The company is expected to grow overall 2015 earnings by a very solid 27%. One other huge tailwind for the electronics giant is lower gasoline prices that are continuing to put more money in consumers’ wallets. That could start to push discretionary buying even higher this year as wage growth also kicks in. New products from the top vendors are also luring customers in for holiday shopping.
Best Buy investors receive a solid 3% dividend. The $47 Jefferies price target is well above the consensus target of $38.94. Shares closed Tuesday at $30.86.