For years, analysts and portfolio managers have anticipated the return of value stocks as the market has moved higher, and for years they have continued to underperform growth stocks. However, that appears to be changing in 2021, as almost every metric from valuations to earnings for the growth arena may be ready to roll over some.
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Value stocks typically are defined as those of companies with solid fundamentals that are priced below those of their peers, based on analysis of price-to-earnings ratio, yield and other factors. The BofA Securities Value 10 portfolio is quantitatively generated and is based on the firm’s proprietary program, versus a consensus earnings surprise model, plus three additional screening criteria. The universe the analysts use is the S&P 500.
We screened the Value 10 portfolio for the stocks with the highest dividends. We found five top picks that could be big 2021 winners. While all are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Cardinal Health
This is also a solid way for more conservative growth and income investors to play the health care sector. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.
The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.
Shareholders receive a very dependable 3.29% dividend. The BofA Securities team has a $69 price objective on the shares. The Wall Street consensus target is lower at $63. Cardinal Health stock closed on Wednesday at $59.11 per share.
Marathon Petroleum
This is a solid way for more conservative investors to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.
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