With the summer almost over, and the slow August trading ready to give way to what could be a very eventful fall, many of the top firms we cover here at 24/7 Wall St. are out with their asset allocation recommendations. While most of the top strategists and analysts are still reasonably positive on equities overall, there is clearly a bias at some shops to be careful given the market’s big run.
A comprehensive new report from the top strategists at UBS makes the case, like many firms, that staying with large- and mega-cap stocks makes sense now. But in a move that some other firms haven’t embraced, they say that large cap value may be the best situation in those stocks now.
We screened the UBS research database for large cap stocks that fit the value proposition and found four companies, all in the Dow Jones Industrial Average, that may be perfect picks for the rest of 2017 and beyond. All are rated Buy at UBS.
This top mega-cap technology stock pick at UBS makes good sense for investors seeking tech exposure. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Wall Street likes the company’s stellar balance sheet, and the ability for the company’s gross margins to move close to the 65% range on a consistent basis as it moves away from the legacy products sold for switching and routing. Cisco is another company that could benefit from the tax on overseas money being lowered as it has a whopping $70 billion in cash, 90% of which is overseas.
While Cisco reported fiscal fourth-quarter results that beat or matched most estimates, revenue was down year over year for the seventh consecutive quarter. Despite the decline, Cisco has beaten earnings and sales estimates for every quarter since CEO Chuck Robbins took over from John Chambers two years ago, and most think he has the tech giant headed in the right direction.
Cisco shareholders receive a 3.7% dividend. The UBS price objective for the stock is $37, while the Wall Street consensus target is $35.73. The shares closed last Friday at $31.44.
This top consumer media company with multiple streams of income to push revenue is a top entertainment and consumer play. Walt Disney Co. (NYSE: DIS) stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming. Combining that revenue growth with the company’s solid media networks and interactive presence, and the 2017 and 2018 revenue estimates could be conservative.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations. Disney is also one of 24/7 Wall St.’s top 10 stocks to own for the next decade.
Families are expected to continue to flock to the company’s theme parks such as Disneyland, Walt Disney World in Orlando, Magic Kingdom Park, Epcot and also the international parks.
Disney shareholders receive a 1.52% dividend. UBS has a $126 price target, and the consensus price objective is $113.58. Shares closed trading on Friday at $102.41.