4. Dollar General: Secular Retail Growth Trend
Dollar General Corp. (NYSE: DG) is the king of dollar stores, and it was located at ground zero of what we thought would be a secular winning theme for retail investors. The rise of the dollar stores has been amped by them “reaching up” into higher prices, taking away business from Wal-Mart and others. Its shares looked very opportunistic in 2010 because its former private equity backers were selling vast amounts of stock, but that has ended and shareholders now have complete control.
Dollar General now also pays a dividend and is worth almost $24 billion, about one-ninth of Wal-Mart. It is a winner from a strong dollar. In 2010 it had 8,900 stores in 70% of states, and in March 2016 it operated almost 12,500 stores located in 43 states.
Dollar General shares were trading at $82.93. The consensus price target of $94.14, and the 52-week range is $59.75 to $87.42. Also of interest in Dollar General:
- Dollar General gets a big upgrade ($100) from Merrill Lynch.
- Buffett should have never sold it and nine other stocks!
- Analysts loved Dollar General earnings and chased it higher.
5. Exxon Mobil: Oil and Gas
Exxon Mobil Corp. (NYSE: XOM) has been the one energy stock that has stood its tests of time. It is even making money during these hard energy times of 2014 to 2016, and doing it without the broad massive and public layoffs seen at other companies in the sector. Having a $400 billion market value has to be worth something. So does a 3.5% dividend yield that was just raised again despite oil being so weak.
If you believe in big oil not dying, then chances are very high Exxon Mobil is your pick — ditto if you think it will go back up. We can talk about the rise of renewables all day long, but the reality is that the lion’s share of the world’s energy will be on fossil fuels for some time.
Shares of Exxon traded recently at $88.11, with a consensus price target of $84.43 and a 52-week range of $66.55 to $89.96. Also of interest for Exxon Mobil:
- Exxon Mobil survived first-quarter earnings.
- Merrill Lynch raised its target on Exxon.
- Buffett shouldn’t have sold Exxon.
- See Exxon’s bullish and bearish case for 2016.
6. General Electric: Conglomerate
General Electric Co. (NYSE: GE) was slow to recover after the recession, but recover it has, and it has been jettisoning its consumer finance operations to be valued as an industrial conglomerate rather than as a conglomerate melded with a bank. GE has bought Alstom, has sold endless billions in financial assets, has sold GE appliances, has finished its Synchrony exit, and is focused on no more large deals. Its stock recovery might have even been stronger had it not added oil services so much in the mix. Now a massive stock buyback plan aims to shrink the float by almost 20%, from 10 billion shares originally down to 8 billion or so in the years ahead.
GE’s dividend hikes had to be put on hold (still at roughly 3%), but that most likely will resume after 2016. GE is harder to analyze for a full net value at almost 20 times earnings, but the buybacks and other efforts should lower that value in time. Health care, energy, water filtration, infrastructure, jet and rail engines should all assure GE’s future growth.
GE shares recently traded at $30.63. The consensus price target is $33.17. The 52-week range is $19.37 to $32.05. Also worth noting on General Electric:
- How analysts view GE after first-quarter 2016 earnings.
- GE is much less dependent on finance now.
- GE could outspend Apple on stock buybacks in 2016.
- See GE’s bullish and bearish case for 2016.
Alternative Pick: 3M Co. (NYSE: MMM) remains a very solid competitor for investors wanting a conglomerate. Its 2.6% dividend yield keeps rising, and its dividend payouts still have room to rise. 3M has been buying shares too, and it is also valued at almost 21 times earnings.
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