If there is one thing that is clearly evident on Wall Street this year, it is that there is some very divergent thought among the major firms we cover. Some are still very bearish and suggest selling every rally immediately. Others are far more positive and point to the basically solid economic news that continues to come out. With the dollar’s strength abating and the economy growing, albeit slowly, one company we cover is staying positive on the current market.
A new report from Robert Sluymer and his outstanding team at RBC makes the case that history tells us declines in secular bull markets like we have seen twice in the past year are often shallow, and the rebounds are often very powerful and sustained. The report also points to the continuing dollar weakness as a positive for stocks, especially cyclicals, some of which have a large percentage of sales outside the United States.
The RBC analysts point to numerous companies in their report. We think that the following four momentum companies they are positive on look very good now. They combine solid fundamentals with outstanding technical patterns.
This is the top pick in its sector and has remained a favorite at RBC for some time. Amphenol Corp. (NYSE: APH) is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. Amphenol designs, manufactures and assembles its products at facilities in the Americas, Europe, Asia, Australia and Africa and sells its products through its own global sales force, independent representatives and a global network of electronics distributors.
The company has a diversified presence as a leader in high-growth areas of the interconnect market, including: automotive, broadband communications, commercial aerospace, industrial, information technology and data communications, military, mobile devices and mobile networks. RBC notes that the company’s IT/ Data Communication division is 19% of total revenue, and the company does 4% or so of its total business with Cisco.
Shareholders are paid a 0.93% dividend. The Wall Street consensus price target for the stock is $63.36. The shares closed Friday at $59.92.
This is the combined entity that was formerly known as Avago and Broadcom. Broadcom Ltd. (NASDAQ: AVGO) is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions. Its extensive product portfolio serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial and other.
Applications for the company’s products in these end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.
The company produces radio frequency (RF) front-end for LTE-enabled Apple products. Wall Street estimates that the company does 15% of its total business with Apple. Additional estimates are that the company has between a 13% and 17% revenue exposure to Apple in the wireless communications segment, which was guided up 10% or more quarter over quarter for the third quarter. Customer diversity and content for Samsung could be more than enough to offset slower Apple business.
Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the RF arena. Many on Wall Street see a cyclical rebound in industrial and communications demand. The SunTrust analysts think the company is growing earnings at 13% organically, and that could lift to 17% with mergers and acquisitions. Trading at 13.1 times 2017 estimated earnings, the stock is cheap.
Broadcom investors are paid a 1.18% dividend. The consensus price target is $192.15. Shares closed Friday at $170.12.