Investing

4 Fallen Angel Large-Cap Blue Chips May Have Massive 2020 Rebounds

Exxon

This remains a top Wall Street energy pick and is a safer long-term play for conservative investors. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.

Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products. Note that Exxon has one of the highest paid American CEOs.

Despite the fact that oil has started above the critical $50 level, the energy sector has been a big disappointment this year. While the S&P 500 is up almost 20% this year, the energy sector, as measured by the Energy Select SPDR ETF (NYSE: XLE), is essentially flat. This comes despite the fact the sector has seen some price premium moved in as Saudi Arabia had production capabilities bombed and Iran recently had a tanker attacked.

The company raised the dividend earlier this year by a nickel per share to $0.87 per share. That now translates to a solid 5.04% dividend. The $100 Merrill Lynch price objective compares with the much lower consensus target price of $79.14. The stock closed most recently at $69.09 per share.

McKesson

This is one of the four companies negotiating a huge opioid settlement. McKesson Corp. (NYSE: MCK) is the largest drug distributor in the United States, and it has sizable businesses in Canada and Europe, including distribution and retail pharmacy assets.

The company is also the largest medical-surgical distributor to the non-acute care market and offers various supply chain services and technology, although it recently divested its clinical health IT platform.

McKesson was one of the companies that settled a bellwether civil lawsuit with two Ohio counties, just hours before they were to go on trial. The $260 million deal set the basis for a broader potential multi-billion-dollar payout to some 2,700 addiction-ravaged communities nationwide that had signed on to the Cleveland lawsuit, the first in a federal court to address the causes of the crisis.

McKesson offers investors just a 0.98% dividend. Merrill Lynch’s Buy rating comes with a $160 price target. The posted consensus target was last seen at $154.94, and the shares closed most recently at $146.92 apiece.

As is the case with most headline-driven stock stories, once the headlines go away, the stocks eventually recover and continue on their long-term corporate path. There are countless examples over the years of top blue chips like these responding and overcoming negative press, and it’s a good bet these four will as well.