The week of October 14 was a volatile one, considering how there has been a lack of volatility most of the summer. The Dow Jones Industrial Average (DJIA) ended the week down roughly 102 points at 18,138.38. Still, investors have become prone to buying their favorite stocks any time the market sells off. High valuations, and even the notion that this bull market is now seven and a half years old, have not thwarted investor appetites.
24/7 Wall St. reviews dozens of analyst research reports each morning, and this ends up being hundreds of analyst calls each week. Our goal is to find new investing and trading ideas for our readers. Some of these reports cover stocks to buy that are blue chip stocks.
When investors hear the word “blue chip” it generally means DJIA stocks with solid dividends. Sometimes this also refers to former Dow stocks, or stocks that might become Dow stocks. Here, we stick by the traditional Dow stocks.
Here were six solid Buy ratings (which includes equivalent Outperform or Overweight ratings) issued in the blue chips during the week of October 14. Just remember: sometimes analysts are wrong, and even the great blue chip stocks come with no guarantees.
Apple Inc. (NASDAQ: AAPL) has been on a serious recovery. The iPhone maker is winning from Samsung’s smartphone recall and cancellation, and Apple finished up 3.1% this week at $117.66, for a 13% gain so far in 2016. It turns out that multiple analysts raised their targets, either on share price targets or on their estimates for sales and earnings.
24/7 Wall St. tracked several major analyst calls this last week, with Credit Suisse even calling for $150 per share next year, and it even shows a trend of more upgraded estimates the prior week as well. Apple has a 52-week trading range of $89.47 to $123.82, and it has a Thomson Reuters consensus analyst price target of $127.59.
Most investors do not buy Apple for its yield, but the company is buying back stock rapidly, and it still comes with almost a 2% dividend yield to boot.
It would appear that Caterpillar Inc. (NYSE: CAT) is in a stealth turnaround. The company’s numbers are still bad, and the trends look in decline from prior growth years. Still, sometimes the investing community treats value and serious stock sell-offs differently. Amazingly, Caterpillar is the top performing Dow stock of 2016, with a gain of 33% so far this year, and it still pays a 3.5% dividend yield.
Caterpillar was raised to Buy from Neutral with a $112 price target at Goldman Sachs on October 11. The prior close was $88.22, and Caterpillar ended the week at $87.67. Its 52-week range is $56.36 to $89.87, and its consensus analyst target is $77.37. Investors need to consider that this is the highest analyst target of all now, and Goldman Sachs expects margin expansion and an earnings recovery much greater than investors have expected.
While Merck & Co. Inc. (NYSE: MRK) remains close to a 52-week high, investors should not overlook the fact that it is up 20.5% so far in 2016. Merrill Lynch raised its rating on the stock to Buy from Neutral on October 13. Its price objective was raised to $70 from $57 as well, and that is above the $67.79 consensus target.
Note that the Merrill Lynch call is based on compelling data for its Keytruda first line lung cancer drug. The firm sees it becoming the standard of care and having 25% share. Merck has a 52-week trading range of $47.97 to $64.86, and its dividend yield is right a 3%.
Nike Inc. (NYSE: NKE) has been down and out in 2016, logging the worst performance this year of all 30 Dow stocks with close to a 17% negative return. That isn’t the growth engine we were used to. After the latest earnings report offered disappointing futures sales, Susquehanna decided that enough is enough. The firm raised Nike’s rating to Positive from Neutral on October 11, and it assigned a $63 price target too.
The prior closing price was $51.79. The consensus price target now is $63.71, though Thomson Reuters showed a consensus of closer to $67 just 90 days ago. Nike close out the week at $51.62 a share, and its 52-week range is $51.48 to $68.19. The dividend yield is currently only 1.25%, but the company has much more room to grow that payout in the years ahead.
Procter & Gamble
It may still be a boring blue chip in consumer products, but Procter & Gamble Co. (NYSE: PG) just keeps chugging along. Now it has a brand sale under its belt in the long road of restructuring into a slimmer and more core-focused company. Independent research firm Argus came out swinging here, saying that the street is grossly undervaluing the growth prospects and underestimating its value.
Argus raised the stock to a Buy from Hold on October 12, and it assigned a $103 price target as well. This target compared with a prior close of $88.54, as well as a 52-week trading range of $73.50 to $90.33. The consensus price target at Thomson Reuters is $92.28. Procter & Gamble still comes with an impressive 4% dividend yield, and it has been among the few 50-year dividend gainers and likely will keep raising that payout ahead.
Again, even blue chips come with no assurances. There is no free lunch on Wall Street.