With the first half of what has proven to be a remarkable 2020 ending, many of the firms we cover across Wall Street are already looking to the second half of the year and at what should be an improving economy as we emerge from the pandemic lockdown. One thing’s for sure: The rally everybody was looking to arrive in the second half of the year already may have come.
The S&P 500 has made a stunning reversal off the March 23 lows, recouping almost all the losses, while the Nasdaq composite index actually printed an all-time high on the strength of the mega-cap tech giants, closing Wednesday above the 10,000 level.
Jefferies analysts recently were tasked with providing their 50 top high-conviction ideas for the second half of 2020 and beyond. The research report that covered them all noted this:
We present the US Research team’s current top ideas, spanning all sectors under coverage. With representation from nearly every publishing analyst, we highlight 50 stocks we find particularly attractive. These are our highest conviction ideas, regardless of theme or macro backdrop, and include our Franchise Picks.
We screened the information technology picks, as the sector has solid momentum heading into the second half of 2020, and found four solid ideas for more aggressive long-term growth investors.
This technology giant has been on an incredible roll since the sell-off. 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.
It’s no surprise that this technology giant is a huge institutional holding, as almost 80% of portfolio managers own the stock. One of those managers is the legendary Warren Buffett. Comprising almost 25% of the Berkshire Hathaway portfolio, Apple represents Buffett’s largest holding, with a reported 252 million shares in the tech giant.
Jefferies loves the company:
Apple is positioned to benefit from the 5G product cycle later this year, which remains the biggest catalyst in our view. We still think Street iPhone unit assumptions for Fiscal year 2021 are too low and underestimate Apple’s position for 5G.
Shareholders receive a 0.93% dividend. Jefferies has a $370 price target on the shares, and the consensus target across Wall Street is $318.84. Apple stock closed trading on Wednesday at $352.84, up almost 3% on the day.
This was a recent addition to the Jefferies Franchise Picks stock list. Motorola Solutions Inc. (NYSE: MSI) is a provider of communication infrastructure, devices, accessories, software and services. The company operates through two segments.
The Products segment has two product lines: Devices and Systems. The primary customers of the Products segment are government, public safety and first-responder agencies, municipalities and commercial and industrial customers operating private communications networks and manage a mobile workforce.
The Services segment provides a range of service offerings for government, public safety and commercial communication networks. This segment’s product lines include Integration services, Managed & Support services and Integrated Digital Enhanced Network.
Jefferies has noted the backup in the shares and said this when adding the stock to its Franchise Picks list:
We expect the shares to re-rate higher as the company leverages their franchise position in Public Safety via new technologies/capabilities (such as Video surveillance), tuck-in software acquisition, and an increased mix of recurring revenue – 33% currently. Motorola Solutions is the dominant provider of mission-critical Public Safety infrastructure and handsets globally. Moreover, there are major barriers to entry around this business, both competitively and technologically. In addition, we view the senior management team as top tier.
Shareholders receive a 1.73% dividend. The Jefferies price objective is $155, but the consensus price target is higher at $160.83. Motorola Solutions stock traded down over 2% on Wednesday to $148.23.