Needless to say, investors that were battered by the fourth-quarter sell-off have felt better recently, as we have entered the new year and a new quarter and the market has finally turned around some. With the potential for solid fourth-quarter earnings, what seems like a more dovish tone from the leader of the Federal Reserve, and a possible breakthrough on trade with China, we are finally seeing some green across our screens after a sea of red.
One good thing about brutal sell-offs is the market often realigns with much better valuations, and good stocks become great stocks to buy because they are much cheaper valuation-wise, and those with big prospects for growth become steals for investors with dry powder.
In a new research report, Jefferies screened its research universe for stocks with lower valuations and better growth potential. The report said this:
With future growth less certain, there’s a desire for stocks with company specific revenue drivers, the issue is that many of these same companies still carry high multiples and the highest growth stocks are well known. We looked for Buy-and Hold-rated companies with above-average forward revenue growth, below-average forward multiples, flat to up revisions and net debt to cap of 60% or less.
At 24/7 Wall St., we reviewed the stocks they picked looking for those that only had Buy ratings. These four look like great picks for the new year.
This stock has been crushed and is a top value play at Jefferies. Broadcom Inc. (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, and Jefferies said this:
After being one of the best-performing stocks over the previous three years, Broadcom declined by 22% peak-to-trough in 2018, as its blocked bid for QUALCOMM and recent acquisition of CA technologies caused uncertainty about the company’s strategic direction. The analyst likes the CA acquisition and believes the software capability will give the company the opportunity to sell chips and software directly to Fortune 500 companies, and position them as more strategic suppliers.
Broadcom investors receive a 4.45% dividend. Jefferies has a $314 price target on the shares, while the Wall Street consensus target is $291.41. The shares closed trading on Monday at $237.98.
This is a solid value buy in the health care sector. Cigna Corp. (NYSE: CI) is a major health services organization that provides insurance and related products and services in the United States and internationally. All products and services are provided exclusively by or through operating subsidiaries of Cigna, including Cigna Health and Life Insurance Company, Life Insurance Company of North America, Cigna Life Insurance Company of Canada and their affiliates.
The health care giant offers an integrated suite of health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits and other related products, including group life, accident and disability insurance. Cigna maintains sales capability in 30 countries and jurisdictions, and it has approximately 86 million customer relationships throughout the world.
The analyst said this about the company:
Stand-alone Cigna’s out performance has led to a 12% increase in guidance year-to-date. In addition, estimates for 2019 and beyond still reflect stand-alone, but should increase when the Express Scripts deal closes. Management has targeted mid-teens accretion in year one. Cigna is the cheapest managed care organization, despite this performance, because of concerns about threats to the pharmacy benefit manager business model.
The Jefferies price target is $244, and the consensus target is at $247.21. The shares closed at $186.50 on Monday.