One tenet that politicians and economists always like to stress, while keeping their fingers crossed behind their back, is the desire for the U.S. dollar to remain strong. The reality is that a cheaper dollar makes U.S. goods and services much cheaper around the world, and it is especially good for large U.S. multinationals that do a significant amount of business overseas.
The U.S. Dollar Index (USDX, DXY) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies of U.S. trade partners. The index is down a stunning 6.23% year to date, which is among the biggest drops in years. In addition, many on Wall Street feel that the days of dollar strength appear to be over now that the French election seems to have sounded an all clear on the euro, creating a potential big boost for profits of global-oriented U.S. companies in the coming months.
We screened the Merrill Lynch research universe for stocks that are rated Buy, pay dividends, and do at least 50% of total sales overseas. We found five that look like outstanding choices now.
The world’s largest international integrated oil and gas company remains a top Wall Street energy pick. Exxon Mobil Corp. (NYSE: XOM) explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa, Asia, Australia and Oceania. It also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas, and petroleum products.
The company posted solid first-quarter results, and Merrill Lynch recently raised the stock back to a Buy rating, as the analyst feels it is an outstanding place for investors to put money, and Exxon is the firm’s top major idea now. The analysts also cite the ability of the company to maintain and cover the cash dividend with lower oil prices as a key positive.
With gasoline prices the lowest they have been in some time, motorists are expected to hit the nation’s highways in record numbers this year for the long holiday weekend. The stock is an excellent buy for investors looking to add energy to their portfolio but leery of the recent weakness in the sector.
Shareholders receive a 3.84% dividend. The Merrill Lynch price target for the stock is $100, and the Wall Street consensus target is $87.04. The shares closed Friday at $80.22 apiece.
This technology giant has pulled back recently and is offering a solid entry point. Apple Inc. (NASDAQ: AAPL) revolutionized personal technology with the introduction of the Macintosh in 1984, and it is among the leaders in the world in innovation with the iPhone, iPad, Mac, Apple Watch and Apple TV.
Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services, including the App Store, Apple Music, Apple Pay and iCloud.
Merrill Lynch thinks the iPhone 8 opportunities are solid, as the firm, like others, feels the product will have significant upgrades. Toss in the easier comparisons and the strong average selling prices, and the new phone is a distinct positive. While the firm does note higher commodity prices are a potential headwind from NAND and DRAM pricing, it sees service growth and acceleration as another distinct positive.
Apple investors receive a 1.75% dividend. Merrill Lynch has a $180 price target, and the consensus is set target is $158.95. The stock closed trading on Friday at $144.18, and Apple is scheduled to report earnings on August 1.