The higher the markets have gone, the more nerve-wracking equity investing has become. With the venerable S&P 500 index sitting at all-time valuation highs, it seems as though everything is fully priced. The reality is that much of the gains in the index are attributable to the most expensive stocks — the FANG group is often cited as an example. The good news for investors is that there is still a plethora of stocks that are cheaper than the overall S&P 500.
An extensive new Jefferies research report offers up 32 stocks that the firm rates at Buy that are all cheaper than the S&P 500. The report noted this:
The spread between the most expensive quintile of S&P 1500 stocks and the least expensive is at the highest level since the tech bubble. Of course, cheapness alone isn’t a great reason to buy a stock, but the widening gap between the most and least expensive stocks does help demonstrate the market’s current obsession with growth, something that may lead to opportunity in stocks that don’t fall into traditional growth buckets, especially if those stocks are seeing inflecting fundamentals.
We screened the 32 stocks for those that also paid dividends and found five that look like great ideas now. Again, all are rated Buy at Jefferies.
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories.The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia, and neuroscience.
One of the biggest concerns with AbbVie is what might eventually happen with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. Last year the patent board instituted Coherus’s Inter Partes Review against the Humira ‘135 patent. The problem with Humira is that biosimilars and generics are itching to enter the market.
Jefferies is very positive on the shares and noted this:
We update our model for recent R&D updates and raise our mid-term revenue and earnings-per-share estimates by 2% and 6%, respectively. Our 2021E revenue is now ~15% ahead of consensus and our mid-term EPS estimate is 30% ahead and we continue to assume entry of US Humira biosimilars around 2019. We believe now that Coherus Biosciences (NASDAQ: CHRS) has failed to gain institution of an IPR, sentiment on shares will improve, and focus will turn to the robust pipeline of R&D data over the next 6-12 months
Shareholders receive a 2.88% dividend. The Jefferies price target for the stock is $107, and the Wall Street consensus target is $82.47. The shares closed Friday at $88.86.
This broadcasting-related stock could have continued solid upside potential. Comcast Corp. (NASDAQ: CMCSA) is the largest U.S. provider of cable services, with over 22 million basic subscribers. It owns NBCU, which includes the NBC TV Networks, Telemundo, MSNBC, USA, Syfy, Bravo, E!, CNBC and several other cable networks, as well as Universal Films and Universal Theme Parks.
Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings. The company reported very solid second-quarter results, and analysts noted at the time:
Comcast reported strong second quarter 2017 earnings, with healthy results across all business lines. The company reported strong consolidated revenue of $21.2bn (+9.8% year-over-year growth) and +10% operating cash flow growth to $7.1 billion.
Investors receive a 1.64% dividend. Jefferies has a $47 price objective, while the consensus target price is $46. Shares closed Friday at $38.48.