During the almost 11-year run of the bull market, and since the market lows that were posted in March, one thing has remained painfully obvious to long-time investors: value stocks, and indeed the entire group, have woefully underperformed growth. Value stocks are those that tend to trade at a lower price relative to their fundamentals (including dividends, earnings and sales). While the market has performed surprisingly well lately, with potential lockdowns due to the COVID-19 increase and to election uncertainty, it makes sense to look at portfolios and possibly make some adjustments for 2021.
Each week, Jefferies presents some of the top value ideas that the firm has. This week’s group is chock full of very well-known companies that, for a variety of reasons, have landed in value territory. All make sense for investors looking to stay in equities but nervous about the potential for market turmoil.
While they are rated Buy at Jefferies, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This mega-cap biotechnology leader is giving investors an outstanding entry point. Biogen Inc. (NASDAQ: BIIB) develops, manufactures and markets therapies for multiple sclerosis (MS), oncology and inflammatory diseases. The company markets three products, Avonex, Tysabri and Tecfidera, that combined have a considerable share of the worldwide over $20 billion MS market.
In addition, the company offers Rituxan for treating non-Hodgkin’s lymphoma, chronic lymphocytic leukemia (CLL), rheumatoid arthritis, two forms of ANCA-associated vasculitis and pemphigus vulgaris. Its Rituxan Hycela is for non-Hodgkin’s lymphoma and CLL, its Gazyva treats CLL and follicular lymphoma, and its Ocrevus is for the treatment of relapsing MS and primary progressive MS. It also has other anti-CD20 therapies.
Jefferies is very bullish and noted this in a recent research report:
The FDA Adcom voted against aducanumab for Alzheimer’s disease last week. We think the stock will get hit towards $220-250 leaving some aducanumab priced in. We remain bullish on shares and highlighted several key factors that might lead to aducanumab’s approval:
1) positive briefing documents show the FDA’s hand and their understanding of the limitations of the data.
2) The complaints seemed focused on the questions and not the answers.
3) The FDA worked closely and frequently with BIIB through this whole process.
4) The committee was basing arguments over statistics but didn’t care about the big picture.
5) The FDA could approve it and use a vague label and have lots of REMS. We would use a major share price dislocation to Buy shares in anticipation of an early approval by 12/31.
Jefferies has a huge $450 price target, well above the Wall Street consensus target of $290.20. Biogen stock ended Tuesday at $248.81 a share.
Almost every investor has likely dined at one of the company restaurants over the years. Brinker International Inc. (NYSE: EAT) owns, develops, operates and franchises casual dining restaurants in the United States and internationally. As of June 24, 2020, it owned, operated, or franchised 1,663 restaurants, including 1,610 restaurants under the Chili’s Grill & Bar name and 53 restaurants under the Maggiano’s Little Italy banner.
Like most companies in the restaurant arena, 2020 has been rough for Brinker, but the Jefferies analysts are very positive on the prospects for 2021:
We were out with our takeaways from meeting with management. We pointed out that the tone was upbeat and the company is very focused on growing organically, driving innovation and proving its ability to execute, while taking down leverage. Additionally, its It’s Just Wings concept continues to exceed expectations, while margin and development upside appears meaningful and underappreciated by the Street. Net-net, we believe the progress the company has made will be recognized with a more premium valuation over time.
Shareholders receive a 1.50% dividend. The Jefferies price target is $56, while the consensus target is $52.15. Brinker International stock closed at $51.19 on Tuesday.