With fourth-quarter earnings reporting about over and spring right around the corner, many of the top firms we follow here at 24/7 Wall St. are making changes to the lists of their high-conviction stock picks for clients. With market volatility continuing to whip stocks back and forth, it makes sense to examine those lists and make some changes, as we could have additional volatility as the political and world landscape looks to remain unsettled, and portfolio managers shuffle their holdings for the rest of 2018.
A new Merrill Lynch research report includes a high-profile financial addition to the firm’s US 1 portfolio of high-conviction stock picks. And removed was a financial stock that has had a solid run since last fall and may be close to fully valued.
Zions Bancorp. (NASDAQ: ZION) is the top regional bank that Merrill Lynch added to its US 1 list, and it is a top play in the western United States. It offers community banking services, such as small and medium-sized business and corporate banking; commercial and residential development, construction and term lending; retail banking; treasury cash management and related products and services; and residential mortgage servicing and lending. It also provides trust and wealth management services; capital markets services, including municipal finance advisory and underwriting; and investment services.
The company also offers personal banking services to individuals, including home mortgages, bank cards, other installment loans, home equity lines of credit, checking accounts, savings accounts, certificates of deposit of various types and maturities, safe deposit facilities, direct deposits and internet and mobile banking services.
The US 1 team removed Regions Financial Corp. (NYSE: RF) from the list. This is a smaller banking play with $123 billion in assets is a member of the S&P 500 index and is one of the nation’s largest full-service providers of consumer and commercial banking, wealth management, mortgage and insurance products and services. It serves customers across the South, Midwest and Texas, and through its subsidiary, Regions Bank, operates approximately 1,500 banking offices and 1,900 ATMs.
The company’s lending portfolio focuses primarily on, residential mortgages, home equity, commercial mortgage and C&I loans. A commercial and industrial loan (C&I loan) is a loan to a business rather than a loan to an individual consumer. These short-term loans may have an interest rate based on the LIBOR rate or prime rate and are secured by collateral owned by the business requesting the loan.
Zions shareholders receive a 1.47% dividend. The Merrill Lynch price objective for the stock is $60, and the Wall Street consensus target is $58.48. The stock closed trading on Wednesday at $54.51.
Investors in Regions receive 1.86% dividend. Merrill Lynch still rates the shares at Buy with a price target of $20. The consensus target is $6.08, and shares closed most recently at $19.37.
In addition, we screened the US 1 list for stocks that may have been hit harder during the recent selling and found three that make good sense for investors now.
This stock has taken a beating this year and is offering an outstanding entry point for investors. Allergan PLC (NYSE: AGN) is a specialty pharmaceutical company that develops, manufactures and markets branded products. The company’s growth has been driven largely by acquisitions supported by internal growth.
Allergan markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women’s health, urology, cardiovascular and anti-infective therapeutic categories, and it operates the world’s third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines.
Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally. The Merrill Lynch analysts note the company’s Aesthetics leadership and that the substantial pipeline optionality is not priced in. And with Restasis now a zero, 2018 estimates represent a clean-trough multiple year.
Shareholders receive a 1.73% dividend. Merrill Lynch has a $215 price target, and the consensus target is $218.81. The shares closed Wednesday at $166.63.
This is one of the highest volume builders in the United States and a top pick at Merrill Lynch. D.R. Horton Inc. (NYSE: DHI) is the largest public builder by closings in the country and is positioned in 78 metropolitan markets in six major regions. It develops single-family homes primarily for first-time and move-up buyers.
Approximately 80% of revenue is derived from the Southeast, South Central and West regions, all of which continue to see very solid growth. D.R. Horton also provides mortgage financing and title agency services to homebuyer.
Shareholders receive a 1.1% dividend. The $71 Merrill Lynch price target is well above consensus target of $56.80. Shares closed Wednesday at $45.42.
This top mid/large energy cap pick is down a stunning 20% in 2018. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, natural gas liquids and natural gas. It primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.
Hess is continuing a transition from an integrated oil and gas company to a predominantly exploration and production entity. It is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio.
Investors receive a 2.2% dividend. Merrill Lynch has set its price objective at $70. The consensus estimate is $55.98, and shares closed at $45.37.
A new addition to the Merrill Lynch high-conviction US 1 list and three additional stocks offering investors outstanding entry points. None of the three appears to be a value trap as they have reasonably good fundamentals but seem to have fallen way out of favor with investors.