Though the markets have fought their way back to even after a horrible start to the year, one very interesting anomaly continues to show up. According to Merrill Lynch, for the eighth consecutive week, its clients sold U.S. stocks, the longest selling streak since 2010. In addition, institutional clients have been the biggest net sellers in recent weeks. Do they know something we don’t know? Or are they pressured by bad performance and need to reset portfolios?
One positive data point the analysts did share was that buybacks by the firm’s corporate clients are tracking a whopping 45% higher the year-ago levels. That in of itself may be helping to keep a bid under the markets. Given that overall Merrill Lynch remains bearish, we screened the firm’s universe of stocks for safe companies rated Buy. We found four that make good sense now.
Altria Group Inc. (NYSE: MO) is a top mega-cap consumer discretionary stock to buy on Wall Street, and the company’s Marlboro brand remains one of the most recognizable in the world. Many Wall Street analysts concede that the stock has solid downside support owing to the generous dividend yield, which remains at a huge premium in relation to the 10-year Treasury rate. Cash flow generation and the return of cash to Altria shareholders remain key facets of the company’s total shareholder return, and the analysts expect support of the strong dividend, which they believe will continue to climb, and strong share repurchase activity.
To diversify away from cigarettes and cigars, Altria has expanded its portfolio into new categories like wine, e-cigarettes and a 27% stake in brewer SABMiller, which together generated nearly 10% of its pre-excise tax revenue last quarter. With SABMiller being acquired, Altria will have a huge stake in the world’s biggest beer company.
While fourth-quarter earnings came in slightly below estimates for the first time in almost two years, the company expects 2016 full-year adjusted diluted earnings per share to be $3.00 to $3.05, which excludes the restructuring charges of approximately a nickel per share. This is positive growth, and solid in an otherwise low growth world.
Altria investors receive a 3.70% dividend. The Merrill Lynch price target for the stock is $66, and the Thomson/First Call consensus estimate is $64.88. The stock closed Tuesday at $61.
This remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, one of the world’s most valuable and recognizable brands, the portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, the company is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.
The strong U.S. dollar could continue to be a headwind to the international business, but the company has expanded the product line and posted fourth-quarter earnings that Merrill Lynch was very encouraged by.
Coca-Cola investors receive a 3.08% dividend. Merrill Lynch has a $48 price target, and the consensus figure is at $46.36. The stock closed Friday at $45.50.