With the market running above 18,000 on the Dow and 2,100 on the S&P 500, many of our readers may be starting to wonder if it’s time to take some money off the table after the spectacular run off the February lows. The fact of the matter is, it is probably wise to stay invested as yields remain historically low, but it may be a good time to look for value ideas to move into.
In a recent research report from Jefferies, as they do every week, the analysts highlight their top value ideas to buy now. This week’s set of ideas make good sense, and rotating from some big winners to these is a solid idea for some investors. All four of the top value ideas are rated Buy at Jefferies, and they pay solid dividends too.
This company is a high-yielding business development company (BDC). Ares Capital Corp. (NASDAQ: ARCC) is a leading specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle market companies, venture capital backed businesses and power-generation projects. Ares Capital originates and invests in senior secured loans, mezzanine debt and, to a lesser extent, equity investments through its national direct origination platform. Its investment objective is to generate both current income and capital appreciation through debt and equity investments primarily in private companies.
Jefferies believes the strength of company’s origination platform, sizable balance sheet and ample liquidity position the company favorably in a very competitive investing environment. Other Wall Street analysts also believe that with current tight spread environment, Ares Capital has the scale and industry relationships to continue to make competitive, high-credit-quality investments.
Ares has a diversified portfolio totaling $9.1 billion at fair value. It consists of investments in 218 portfolio companies. The company made a total of $972 million in new investment commitments in the fourth quarter of 2015. In the March quarter, originations are expected to rise on increased programs and opportunities.
Ares shareholders are paid a very rich 10.09% dividend. The Jefferies price target for the stock is $17. The Thomson/First Call consensus target is $16.22. Shares closed Wednesday at $15.07.
This is a higher yielding utility stock for accounts needing income but worried about the current environment. FirstEnergy Corp. (NYSE: FE) is a diversified energy company dedicated to safety, reliability and operational excellence. Its 10 electric distribution companies form one of the nation’s largest investor-owned electric systems, serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York. Its transmission subsidiaries operate more than 24,000 miles of transmission lines that connect the Midwest and Mid-Atlantic regions.
The company posted mixed fourth-quarter numbers, matching earnings estimates but the revenues came in below Wall Street expectations. The Jefferies team is positive on the stock as they feel the FERC will accept the company’s power purchase agreement, which should minimize the need to utilize equity. They note that at current trading levels, there is no probability of that approval factored in and assumes a $2 billion equity issuance.
FirstEnergy investors receive a rich 4.14% dividend. Jefferies raised its price target to $40.50 from $36, and the consensus figure is lower at $37.59. Shares closed on Wednesday at $34.76.