Portfolio managers and others in charge of investments are facing another up year, but many are trailing their benchmarks, and there is nothing worse for active managers than trailing that benchmark, especially in an up year. For example, if your benchmark is the S&P 500, it is up about 9% for the year. If you are up, say, 6%, then you are trailing the benchmark.
In a new report, SunTrust Robinson Humphrey has combed through 38 analysts and a coverage universe of 730 stocks to come up with 32 stocks to Buy that are designed to help clients “catch up” to their benchmarks. The stocks that made the cut are part of a compelling list of lagging stocks rated Buy that could outperform the overall market this quarter.
We chose five well-known stocks that look like they do indeed have solid upside potential, and all can help add alpha to portfolios.
This red-hot momentum play has continued to be among the most bought tech companies on Wall Street. Alibaba Group Holding Ltd. (NYSE: BABA) runs the largest retail marketplaces (Taobao, TMall) and leading B2B sites (Alibaba.com, 1688.com) in China and Lazada in Southeast Asia. It collects revenues mainly from commissions, marketing services, subscription fees, cloud computing and software, as well as other value-added services.
The company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. Top analysts expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.
The SunTrust price target for the stock is $205, and the Wall Street consensus target is $229.33. The shares closed Monday’s trading at $162 apiece.
This stock has been on fire over the past year and remains a top pick across Wall Street, and it is also on the Merrill Lynch US 1 list. 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 under-owned 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 are paid a 1.65% dividend. SunTrust has a $338 price target, and the posted consensus target is lower at $289.35. The stock closed on Monday at $249.51 per share.