As the markets have raced back to near historic highs, it is important to remember that much of the record-breaking performance from not only this year, but over the past five years, has been driven by the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). With the market clearly close to or at full value again, it makes sense to look to areas where alpha can be generated for the rest of 2020.
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BofA Securities is out with its top picks for the third quarter. The firm has eight that are rated Buy and two ranked Underperform, which could be attractive for those looking for short-sale ideas. The report noted this:
In this report, we introduce our latest Top 10 short-term stock recommendations for the quarter ahead. These high conviction ideas are based on our views of potential significant market and business-related catalysts that we think will affect these stocks in the quarter. Ideas will generally remain on the list through the quarter unless coverage is dropped or the recommendation changes. Any security that is removed will not be replaced.
Here are the eight Buy-rated stocks.
Apple
This technology giant has been on a roll since the sell-off, but there are some concerns on forward iPhone demand. Apple Inc. (NASDAQ: AAPL) designs, manufactures and markets consumer electronics and computers, and has developed its own proprietary iOS and Mac OS X operating systems and related software platform/ecosystem.
Revenues are derived principally from the iPhone line of smartphones, hardware sales of the Macintosh family of notebook and desktop computers, iPad tablets and iPod portable digital music players. The company also realizes revenue from software, peripherals, digital media and services.
Shareholders receive a 1.45% dividend. BofA Securities has a $390 price target on the shares, and the Wall Street consensus target is $318.84. Apple stock closed trading most recently at $373.85.
Fiserv
This solid financial tech play has good upside to the BofA Securities price target. Fiserv Inc. (NASDAQ: FISV) provides financial services technology worldwide. Its First Data segment provides merchant acquiring, e-commerce, mobile commerce and other business solutions; credit card and loan account processing, commercial payments, customer communications, plastics solutions, customer service and other products; and various network solutions and security and risk and fraud management solutions.
The Payments and Industry Products segment offers electronic bill payment and presentment services; internet and mobile banking software and services; account-to-account transfers; person-to-person payment services; debit and credit card processing and services; payments infrastructure services; and other electronic payments software and services.
BofA Securities has set a $120 price objective, while the consensus price target is $122.32. Fiserv was last seen trading at $98.11.
Fortiv
This is an under-the-radar mid-cap idea. Fortiv Corp. (NYSE: FTV) designs, develops, manufactures, markets and services professional and engineered products, software and services worldwide.
Its Professional Instrumentation segment provides test tools and thermal imaging and calibration equipment for electrical, industrial, electronic and calibration applications; online condition-based monitoring equipment; portable gas detection equipment, consumables and software as a service offerings; subscription-based technical, analytical and compliance services; and software, data analytics and services for critical infrastructure in utility, industrial, energy, construction, facilities management, public safety, mining and health care applications, as well as environmental, health and safety applications.
The BofA Securities price target is $76, above the $73.69 consensus target. Fortiv stock closed at $69.15 a share.
Kraft Heinz
Kraft Heinz Co. (NASDAQ: KHC) was formed almost five years ago via the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company with $29 billion of annual revenues generated by well-known brands such as Kraft, Heinz, Oscar Meyer and Maxwell House. The company is the third-largest food and beverage manufacturer in North America and derives 76% of revenues from that market and 24% from International.
Additional Kraft Heinz brands include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
The huge 5% dividend appears safe for now. The $38 BofA Securities price target is higher than the $31.63 consensus target. Kraft Heinz stock closed at $32.00.
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L Brands
This retail leader has struggled some, but it could be offering value buyers a great idea. L Brands Inc. (NYSE: LB) operates as a specialty retailer of women’s intimate and other apparel, personal care, and beauty and home fragrance products. The company operates in three segments: Victoria’s Secret, Bath & Body Works and Victoria’s Secret and Bath & Body Works International.
The company’s products include bras and panties, loungewear, athletic attire, shower gels and lotions, aromatherapy, soaps and sanitizers, and body care accessories. The company offers its products under the Victoria’s Secret, PINK, Bath & Body Works, White Barn, C.O. Bigelow and other brand names.
The BofA Securities target price of $25 compares with a $15.60 consensus target. L Brands stock closed at $15.62.
L3Harris Technologies
The result of a recent merger, this is now the sixth-largest defense company. L3Harris Technologies Inc. (NYSE: LHX) is an agile global aerospace and defense technology innovator that engages in the provision of defense and commercial technologies across air, land, sea, space and cyber domains.
Its Integrated Mission Systems segment includes intelligence, surveillance, and reconnaissance; advanced electro optical and infrared; and maritime power and navigation. The Space and Airborne Systems segment comprises space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare.
Shareholders receive a 1.41% dividend. The BofA Securities price target is $250. The consensus figure is $240. L3Harris Technologies stock was last seen trading at $174.00.
O’Reilly Automotive
This is a great consumer stock to own, as consumers will want their vehicles in top shape for the summer travel season. O’Reilly Automotive Inc. (NASDAQ: ORLY) is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The company sells its products to both DIY and professional service provider customers.
Its product line includes new and remanufactured automotive hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control, chassis parts, driveline parts and engine parts; maintenance items, such as oil, antifreeze, fluids, filters, wiper blades, lighting, engine additives and appearance products; and accessories, such as floor mats, seat covers and truck accessories.
BofA Securities has a $470 price target. The consensus target is $438.15. O’Reilly Automotive stock closed at $425.84.
24/7 Wall St.Splunk
This remains a top buy on Wall Street and was recently added to the firm’s US 1 list of top stock picks. Splunk Inc. (NASDAQ: SPLK) provides a software platform for collecting, storing, indexing, searching and analyzing machine-generated data, such as log files and configuration files, which are prevalent in every type of IT system, device and application.
Splunk technology is potentially applicable and disruptive in several market segments, including IT operations, security and compliance, and business intelligence. These market segments are collectively worth $28 billion today.
Wall Street analysts agree that the company offers the de facto standard for security information and event management. It also offers orchestration solutions for security operations, a fast emerging category of products.
The BofA Securities $249 target price is well above the $182.22 consensus target. Splunk stock closed at $198.66.
The two stocks ranked as Underperform are Autodesk Inc. (NASDAQ: ADSK) and ON Semiconductor Corp. (NASDAQ: ON). While not suited for all investors, both of these again could be short-sale candidates.
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