Despite the recent volatility, which has investors seeing huge swings in the market, there is plenty to be positive about first-quarter earnings, reporting of which is right around the corner. Many U.S. companies are enjoying the most favorable currency tailwinds in six years, in addition to the benefits of lowered corporate taxes. In fact, almost 150 companies have announced major spending plans since the package was approved late last year.
A new research report from Merrill Lynch’s outstanding equity and quantitative strategist, Savita Subramanian, lists stocks that are expected to beat earnings and sales estimates. The report also highlights companies in the list that are under-owned by active fund portfolio managers.
Here we take a look at eight of the under-owned shares that may offer the best value to investors now.
Insurance companies tend to do well as rates rise, and this sector giant may be an outstanding pick for investors. Allstate Corp. (NYSE: ALL) is the largest publicly traded personal lines insurance company, with about 12% of the personal lines market (one in eight households). Allstate is primarily a direct writer. Besides a full array of personal lines P/C products (preferred, standard and nonstandard auto insurance, and homeowners’ insurance), the company also offers life insurance and annuity products.
Allstate shareholders are paid a 1.94% dividend. The Merrill Lynch price objective for the shares is $111, and that compares with the Wall Street consensus target price of $106. The stock closed trading on Wednesday at $94.61.
After years of lousy earnings growth, this large cap leader is hitting on all cylinders. Caterpillar Inc. (NYSE: CAT) is the largest manufacturer and marketer of construction equipment worldwide, It is also a leading manufacturer of diesel engines and turbines for transport and industrial applications.
Caterpillar shareholders are paid a solid 2.15% dividend. Merrill Lynch has a $192 price objective for the shares, and the consensus target price is $180. The stock closed Wednesday at $145.16 per share.
This is a top play for investors looking to the Permian Basin. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company. Its primary activities are in the Mid-Continent and Permian Basin areas of the United States.
Cimarex has a diversified base of high-quality production and attractive drilling opportunities. It should be noted that hedge funds have initiated sizable new positions in the company over the past year, and like its brethren in the Permian, many consider the company a very solid takeover target.
Investors in Cimarex are paid just a 0.7% dividend. The whopping $161 Merrill Lynch price target is well above the posted consensus price target of $138.19. The shares closed most recently at $92.75.
The fast-food giant does a ton of business overseas and still remains a solid pick for investors seeking dividends and a degree of safety. McDonald’s Corp. (NYSE: MCD) is the world’s leading global foodservice retailer, with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local business persons.
McDonald’s shareholders are paid a nice 2.57% dividend. The Merrill Lynch price target for the shares is $180. The consensus price objective is $187.50, and the shares closed Wednesday’s trading at $158.41.