Despite the awesome success of the market during the so-called Trump Rally, it’s becoming clear that the market is tired, and we possibly have run a little too far, too fast. With the end of the year tax loss selling, combined with a general posture of taking some profit, the market has slowed down in its ascension. The Dow Jones Industrial Average, which just a few trading days ago looked poised to top the 20,000 level, and may get close again today, is also looking overbought.
We decided to screen our 24/7 Wall St. research database for solid 2017 ideas that were still reasonably prices, and what better portfolio to look for ideas in than the UBS Quality Growth at a Reasonable Price (Q-GARP) portfolio.
The Q-GARP portfolio has consistently outperformed the S&P 500 since inception in 2007, and it offer investors an outstanding portfolio using an initial quantitative screen of stocks based on:
- Quality metrics: high and stable profitability
- Growth: high expected earnings growth
- Valuation: low valuation relative to peers
The final list is a compilation of quality growth stocks that the analysts believe are trading at attractive valuations. While trailing the S&P 500 on a total return basis this year, it has still outperformed since inception. We found five stocks that could be solid 2017 winners, and four of the five also pay solid dividends.
This top stock has been hit hard this year, down over 25% since May. CVS Health Corp. (NYSE: CVS) provides integrated pharmacy health care services. Its Pharmacy Services segment offers pharmacy benefit management solutions, such as plan design and administration, formulary management.
The Retail/LTC segment sells prescription and over-the-counter drugs, beauty products and cosmetics, personal care products, convenience foods, seasonal merchandise and greeting cards, as well as provides photo finishing services.
The company operates 9,655 retail stores in 49 states, the District of Columbia, Puerto Rico and Brazil, primarily under the CVS Pharmacy, CVS, Longs Drugs, Navarro Discount Pharmacy and Drogaria Onofre names; online retail pharmacy websites; and 32 on-site pharmacy stores, long-term care pharmacy operations and retail health care clinics.
Note that some think Warren Buffett may have his eye on the company.
CVS investors receive a 2.53% dividend. The UBS price target for the shares is $88.50. The Wall Street consensus price target is $86.45. The shares closed Thursday at $79.
This company remains the undisputed leader in the home improvement retail category. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
Home Depot stores sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance and professional service programs to do-it-yourself (DIY), do-it-for-me (DIFM) and professional customers.
Home Depot could continue to be a benefactor from the damage done in Florida and along the Southeast from Hurricane Matthew. Toss in the huge rebuilding efforts in Louisiana after the severe flooding there, and the third and fourth quarter results could indeed be a bonanza for the company and investors.
Home Depot investors receive a 2.04% dividend. UBS has a $145 price target, while the consensus price objective is at $147.04. Shares closed Thursday at $135.10.