All the firms that we follow here at 24/7 Wall St. keep a list for their institutional and retail clients of high-conviction stock picks. These are generally the stocks they not only like on a longer-term basis, but those that have big upside to the assigned target prices. These portfolios of top stock picks are often how brokerage firms and banks set themselves apart from each other.
We have covered the Jefferies Franchise list stocks since its inception back in December of 2013, and have watched as it brought home some huge winners for the firm’s clients. On a total return basis, the Franchise list has outperformed the S&P 500 by 17.7% since it was launched, and it beat the index in March by a full percentage point.
The current list has five sector-leading companies that look especially good now.
The search giant continues to expand and, while search is king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Back in the fall, Google outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail). Smart shopping campaigns leverage machine learning to make sense of touch points along the consumer purchase path, including better offline attribution capabilities (locally oriented searches up 200% over past two years) and improved purchase conversion rates (20% on average).
Jefferies said this about the tech Goliath:
In our view, core search business is still attracting incremental ad dollars in the shift to digital and mobile. YouTube is the best positioned platform to take advantage of a huge online video opportunity. Google Cloud could represent the next break-out play for shares.
The Jefferies price target for the shares is $1,450, and the Wall Street consensus target is $1,343.80 The shares closed Thursday at $1,219.45.
This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.
The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.
With Permian production and asset disposals targets reset, the company can raise its dividend 20% and buy back 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline, enabled by step change in capital efficiency and driven by doubling Permian production.
Jefferies remains bullish on this energy leader:
Most advantaged portfolio in the sector. Strong growth profile driven by high-margin projects tied to oil prices. Australian LNG and Tengiz are essentially no-decline assets and underpin financial performance. Industry-leading Permian Basin position provides short cycle investment opportunities to 2030+.
Chevron shareholders receive a 3.81% dividend. Jefferies has a $147 price target, and the consensus target is lower at $137.73. The shares closed at $124.80 on Thursday.