4 Red-Hot Stocks to Buy That Are Cheaper Than the S&P 500

Print Email
Broadcom

This company remains a top pick across Wall Street and derives 20% of its business from Apple. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.

Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.

The analysts note that the stock is underowned compared to peers, and the 40% iPhone content growth, combined with the closure of the Brocade purchase, which they feel is accretive, are very positive catalysts. They also feel dividend growth is possible.

Broadcom investors receive a 1.63% dividend. The $286 Jefferies price target is the same as the consensus target. The stock closed most recently at $245.82 per share.

Steel Dynamics

This is another company that Jefferies remains very positive on.

Steel Dynamics Inc. (NASDAQ: STLD) operates six steel mini-mills in Indiana, Virginia, Mississippi and West Virginia. Production capacity has been nearly 10 million tons, of a total 110 million U.S. capacity.

The company makes flat rolled products, special/merchant bars and structural steel products. Steel Dynamics can process about 7 million tons of ferrous scrap and has a downstream operation that processes finished steel. The analysts noted this in the research:

The company remains one of analyst Seth Rosenfeld’s top picks in the US steel sector as a high-quality play on the gradually tightening domestic steel market. In the near-term, Steel Dynamics should benefit from improving margins as scrap input costs begin to retrace heading into the fourth quarter after a period of abnormal strength, which weighed on profitability in recent months. In the medium-term the company is leveraged to rising domestic demand across diversified end markets (infrastructure, machinery, autos) and falling import penetration, which should allow them to better optimize its existing excess capacity with notable fixed cost leverage as volumes rise.

Shareholders are paid a 1.6% dividend. The Jefferies price target is $42. The consensus target is $40.14, and the stock ended Wednesday trading at $38.73 a share.

I'm interested in the Newsletter
 

These four top companies to buy are big Wall Street favorites, have reported solid earnings and are much cheaper than the S&P 500 as a whole. All make good sense for more aggressive growth accounts.