We see a tremendous amount of sell-side research and analysis every day here at 24/7 Wall St., and over the years certain equity strategists have made some very impressive calls. On March 19, into the teeth of what was some of the most brutal, high-velocity selling ever recorded, Barry Bannister and his team at Stifel stood their ground and called for a reversal, which happened just a few days later.
At the time, Bannister and his analysts called for a rally to 2,750 on the S&P 500, and in fact, the market reversed on March 23 and we rallied back to 2,640. While Monday’s massive rally actually closed above that level at 2,663, investors have been pounded with horrible job loss data and millions of workers filing for unemployment. Monday’s solid rally may have turned the tables on the bears for now.
This week, after surveying what has been perhaps one of the most remarkable six weeks in stock market history, the Stifel team is again standing with their call for a rally to 2,750 by the end of April. In an updated market and portfolio strategy research piece, they urge investors to stay focused, despite the almost daily bombardment of alarmist news.
The research report noted this:
We see U.S. COVID-19 diagnosed cases peaking later in April (then dissipating in summer, possibly returning winter 2020-21), with stocks rising in advance of the near-term virus top. The S&P 500 historically looks four months out, and currently discounts declining earnings-per-share (we provisionally estimate $130 EPS in 2020 estimated versus $142 prior) and weak GDP through early August, but Equity Risk Premium is now attractive if deflation is avoided.
Given the bullish sentiment at Stifel, for the near term at least, we screened our 24/7 Wall St. research database looking for companies rated Buy that still are solid picks in what remains dangerous and somewhat uncharted investment waters.
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.
Chevron, which is among the companies with the largest corporate debt, this week became the latest major oil company to slash spending after halting its $5 billion-a-year share buyback and halving spending in the Permian Basin, which means a large decrease in projected output from America’s biggest shale region.
The California-based oil giant has said that it would lower projected 2020 capital spending by 20%, or $4 billion. The Permian will account for the largest single element of that reduction, translating into 125,000 fewer barrels of oil equivalent per day than previously forecast, a quantity equal to about 2.5% of the basin’s total current production.
Shareholders receive a hefty 6.42% dividend, which the analysts feel comfortable will remain at current levels. The Jefferies price target for the shares is $90, and the consensus Wall Street target is $90.43. Monday’s last trade in Chevron stock was reported at $80.39, which was up over 7% on the day.
If there is any company with products that stay in style, it is this one, which only has 7% foreign sales. Constellation Brands Inc. (NYSE: STZ) is a leading global producer and marketer of beverage alcohol. Its wide-ranging portfolio spans wine, spirits and imported beer.
The company is one the world’s largest wine companies overall and is the largest global premium wine company. Key brands include Robert Mondavi, Clos du Bois, Blackstone, Arbor Mist, Black Velvet and SVEDKA vodka. It also owns 100% of the rights to brew, market and sell Modelo’s Mexican beers in the United States.
The company made a gigantic $3.8 billion investment in cannabis company Canopy Growth last year to increase its holdings in the company. The record investment reflects a world in which marijuana has become ubiquitous as its counterculture stigma fades. While the pot stocks have been crushed, the long-term trend looks positive.
Investors receive a 2.11% dividend. Jefferies has a lofty $215 price target, while the consensus target is $191.72. Constellation Brands stock closed trading almost 8% higher on Monday to $142.26 a share.