Investing

11 Top Merrill Lynch Stock Picks for 2020

Exxon Mobil Corp. (NYSE: XOM) is a diversified oil company with a high ESG score, although most ESG investors will wonder why the largest U.S. oil and gas stock can even count in the theme. The downstream business (35% of net income) is likely to benefit from the new IMO 2020 regulation. The stock is also underweighted by large-cap active funds. Exxon is one of Merrill Lynch’s top and most aggressive calls in the oil (and gas) patch, despite it being the largest supermajor in the United States. The firm’s price objective of $100 is way above the $78.47 consensus target price, and the current price of $69.50 offers new investors a yield of about 5% at this time.

Citigroup Inc. (NYSE: C) offers solid value as it continues to trade below its book value. The bank offers a growing dividend at a reasonable price with a still-low payout ratio. Citigroup is still the cheapest of the money center banks against book value per share, and the $79.50 current share price comes with a dividend yield of about 2.5%. Merrill Lynch’s price objective of $85 is actually under the consensus target price of $86.06.

Dentsply Sirona Inc. (NASDAQ: XRAY) is more insulated from political/election backdrop in 2020, when compared with pharmaceutical and managed care companies. This stock is still underweight at large-cap active funds, and it could benefit from a rotation from large caps to small caps. Shares currently trade at $56.35, and the Merrill Lynch price objective of $65 is above the consensus target price of $62.27. The dividend yield is only 0.7%.

Raytheon Co. (NYSE: RTN) offers inexpensive valuations, high quality and above-market free cash flow yield. The company could also see defense benefits from geopolitical risk and the “great power competition” with China. Raytheon is still pending its merger, but while it trades at $220.50, Merrill Lynch has a price objective of $265. That is handily above the consensus target price of $228.07. It also has a 1.7% yield.

Intel Corp. (NASDAQ: INTC) has a healthy free cash flow, dividend yield and a high-ranked ESG score. Intel is also underweight by large-cap active funds. It was trading at $59.50, and the Merrill Lynch 12-month price objective of $70 is handily above the consensus target price of $56.72. The processor giant still has a yield of 2.1%.

WestRock Co. (NYSE: WRK) is a corrugated packaging company and a more domestically oriented materials stock. The company has a high free cash flow yield, high dividend yield and solid dividend growth. WestRock trades at $42.75 and currently comes with better than a 4% dividend yield. Merrill Lynch’s 12-month price objective of $48 is above the $46.14 consensus target price, but it is still nowhere close to being a street-high target.

Kimco Realty Corp. (NYSE: KIM) is a grocery-anchored real estate investment trust that could benefit from the BOPIS (buy online, pickup in store) trend. The stock could benefit from a rotation from large caps to small caps. Kimco has close to a 5.4% yield. At $20.57 a share, it has a consensus target price of $20.68. That is well under the $24 price objective of Merrill Lynch (which is tied for the street-high here).

American Electric Power Co. Inc. (NYSE: AEP) is a defensive hedge against a slowdown. It has stable earnings and limited commodity exposure. The stock offers a low payout ratio and high dividend yield. It ranks well on Merrill Lynch’s quantitative investing models, among other factors. AEP recently traded at $94, with right at a 3% dividend yield. Merrill Lynch’s price objective of $106 is handily higher than the $97.67 consensus target price, and the firm has the highest target of the major brokerage firms covering the utility.