Investing

Why Q1 S&P 500 Winners May Be the Best Q2 Bets as Well

For those in the investing world, the month of March seemed like a whole year, closely resembling the length of January after the holidays each year. With the S&P 500 down an even 20%, and the constant 24/7-365 news cycle tsunami hitting investors each and every day, only 30 stocks out of the entire venerable index were up for the quarter.

Many of the stocks that made it relatively unscathed through the quarter are the logical candidates, especially the consumer stocks. What caught our eye were the companies that could follow up that first-quarter success, with another victory for shareholders in the second quarter. We screened the 30 stocks by sector that ended the quarter in the green against the Merrill Lynch research coverage universe for those rated Buy. We found five that could very well turn in a commiserate performance as we head into the second quarter.

Activision Blizzard

This remains a top gaming pick on Wall Street and the Merrill team is still positive on the shares. Activision Blizzard, Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide.

Activision Blizzard develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers. The company’s legacy franchise Call of Duty game continues to be hugely popular. The analysts said this when discussing its prospects:

The new Call of Duty Modern Warfare 2 remake includes remastered single-player campaign mode, but no online multiplayer. We expect low to mid-single digit millions of units based on sales performance of past remakes with revenues and earnings per share of $70 million and $0.06. Launch not financially significant as game included in guidance for “several remastered and re-imagined experiences” in 2020.

Investors receive just a 0.70% dividend. Merrill has a $70 price target for the shares, while the Wall Street consensus target is at $68.89. Activision Blizzard stock ended the week at $59.98 a share.

Amazon

This is the absolute leader in online shopping and is on the Merrill Lynch US 1 list of top stock picks. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. It has one of the most valuable brands in the world.

The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.

The company is also rolling out its checkout-free Go technology in a large grocery store and plans to license the cashierless system to other retailers. Amazon Go Grocery opened in Seattle on Tuesday. It uses an array of cameras, shelf sensors and software to allow shoppers to pick up items as varied as organic produce and wine and walk out without stopping to pay or scan merchandise. Accounts are automatically charged through a smartphone app once shoppers leave the store.

The Merrill target price is a whopping $2,480, and the consensus target is $2,409.78. Amazon.com stock closed at $1,906.59 on Friday.

Eli Lilly

This is another company with solid upside potential. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.