Jefferies Has 3 Top Blue Chip Value Stocks to Buy Now
With the potential for a year-end rally looking better after Monday’s market action, many investors are turning their attention to end-of-the-year portfolio restructuring. One of the best ideas may be to look for large cap, blue chip companies that have dropped in price and have actually fallen into the value category.
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 three of this week’s top value calls. All are rated Buy.
This is the old financing arm of GM that was known before the Great Recession as GMAC. Ally Financial Inc. (NYSE: ALLY) has been rebuilt into a stronger and more solvent Internet-focused bank with no brick-and-mortar locations. Its customers do their banking solely through the bank’s website, its mobile application and automatic teller machines.
The Jefferies analysts feel flat out that in comparison to peers, and there are few actually structured like Ally, the stock is very cheap. Trading at a 7.7 times estimated 2016 earnings, and at a less than one times book value, the analysts feel that there is room to run. Most on Wall Street feel that the stock should trade more like 1.25 times book value.
Most on Wall Street feel that the bank is moving away from a dependence on GM and into a more balanced operating structure, which is good for long-term strategy. With the capital structure optimized and management having diversified the originations platform ahead of expectations, the stock has tremendous value at current levels.
The Jefferies price target for the stock is $28. The Thomson/First Call consensus price target is $27.39. Shares closed on Monday at $18.33.