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- 2018 was a rough year for Wall Street as US equities booked their biggest annual decline since the financial crisis and their worst December since the Great Depression.
- But there is still opportunity to make money in stocks, and Bank of America Merrill Lynch is here to help. The bank has issued a list of stock picks for the first quarter of 2019.
208 was a rough year for US equity markets, with stocks seeing their worst annual performance since the financial crisis and worst December since the Great Depression. However, there’s still plenty of money to be made in the new year.
To help investors make better choices, Bank of America Merrill Lynch has published a list of stock picks for the first quarter of 2019. The list contains nine stock recommendations across seven sectors, which BAML predicts will rocket higher in the next three months. Markets Insider ranked the list by comparing BAML’s price target to their where shares were trading as of January 2.
Here are the 9 stocks BAML says could deliver the biggest return in the first quarter, in ascending order of their potential upsides.
AT&T
MI
Ticker: T
Industry: Telecom carriers
Market Cap: $221.81 billion
Price Objective: $37
Potential Upside: +28%
P/E(2019): 7.6x
% of sell-side rated Buy: 47%
Short interest % of float: 1.0%
BAML Comment:
“The company held an analyst day in November where it guided to $26bn of free cash flow in 2019 relative to a $14.5bn dividend, which will facilitate substantial deleveraging, and it also recently raised its dividend for the 35th year in a row,” said David W. Barden.
Barden noted: “We believe the Street’s 4Q18 consensus EPS estimate of $0.85 ($3.52 for the year) is too low vs. our $0.89.”
Source: BAML
Walt Disney
MI
Ticker: DIS
Industry: Media & Entertainment
Market Cap: $196.26 billion
Price Objective: $144
Potential Upside: +32%
P/E(2019): 15.3
% of sell-side rated Buy: 60%
Short interest % of float: 1.98%
BAML Comment:
“With a leading IP (intellectual property) portfolio that is poised to expand via the pending acquisition of a large portion of 21st Century Fox (FOXA), we believe DIS is best positioned to accretively extend its brands and content into new streaming platforms, including its own direct-to-consumer (DTC) efforts with ESPN+ and Disney+ (which will launch in the fall of 2019 and feature exclusive content from the Disney, Pixar, Marvel, Luscasfilm and National Geographic brands),” said Jessica Reif.
Source: BAML
Honeywell
MI
Ticker: HON
Industry: Industrials
Market Cap: $99.73 billion
Price Objective: $180
Potential Upside: +37%
P/E(2019): 16.3
% of sell-side rated Buy: 74%
Short interest % of float: 0.82%
BAML Comment:
“In our view, given cyclical risks, investors will continue to assign premium multiples to ‘quality names’ over cyclical names, and we view HON’s valuation as attractive given its diversified portfolio with growth visibility and premium execution characteristics,” Andrew Obin said.
Source: BAML
Equinix
MI
Ticker: EQIX
Industry: REITs
Market Cap: $31.547 billion
Price Objective: $490
Potential Upside: +41%
AFFO Multiple (2019): 16.2x
% of sell-side rated Buy: 92%
Short interest % of float: 1.3%
BAML Comment:
“EQIX is a top pick based on strong secular data center demand, exposure to faster growing European and Asian markets, projected revenue growth acceleration, and potential upside to 2019 forecasts,” Michael J. Funk noted.
Source: BAML
Procter & Gamble
MI
Ticker: CI
Industry: Managed Care
Market Cap: $56.36 billion
Price Objective: $258
Potential Upside: +43%
P/E(2019): 12.5x
% of sell-side rated Buy: 71%
Short interest % of float: 4.5%
BAML Comment:
“We expect CI to outperform the group in 2019 as the Express Scripts acquisition adds capabilities, cashflow, and potential EPS upside (we think CI could achieve close to the low end of its 2021 pro forma EPS target a year early),” said Kevin Fischbeck.
Source: BAML
CIGNA
MI
Ticker: CI
Industry: Managed Care
Market Cap: $56.36 billion
Price Objective: $258
Potential Upside: +43%
P/E(2019): 12.5x
% of sell-side rated Buy: 71%
Short interest % of float: 4.5%
BAML Comment:
“We expect CI to outperform the group in 2019 as the Express Scripts acquisition adds capabilities, cashflow, and potential EPS upside (we think CI could achieve close to the low end of its 2021 pro forma EPS target a year early),” said Kevin Fischbeck.
Source: BAML
Marvell
MI
Ticker: MRVL
Industry: Semiconductors
Market Cap: $7.92 billion
Price Objective: $24
Potential Upside: +48%
P/E(2019): 12.5x
% of sell-side rated Buy: 89%
Short interest % of float: 3.5%
BAML Comment:
“We believe the 35%+ sell-off from recent highs in March presents a particularly attractive buying opportunity for MRVL,” said Vivek Arya.
“We see potential for further upside as the 5G mobile cycle ramps and MRVL has the opportunity to gain base-station design wins with new Tier 1 customers,” Arya added.
Source: BAML
Lockheed Martin
MI
Ticker: LMT
Industry: Aerospace & Defense
Market Cap: $83.45 billion
Price Objective: $390
Potential Upside: +50%
P/E(2019): 13.5x
% of sell-side rated Buy: 64%
Short interest % of float: 0.99%
BAML Comment:
“Strong execution, cash flow generation and a shareholder-friendly capital redeployment strategy will likely continue to support share price performance in the near term,” said Ronald J. Epstein.
Source: BAML
Tapestry
coach
Ticker: TPR
Industry: Specialty Retail
Market Cap: $11.18 billion
Price Objective: $60
Potential Upside: +77%
P/E(2019): 12x
% of sell-side rated Buy: 70%
Short interest % of float: 1.88%
BAML Comment:
“We see sales drivers and gross margin opportunities for Coach, think Kate Spade synergy targets appear conservative and expect significant margin expansion for Stuart Weitzman over the next few years,” said Lorraine Hutchinson.
“We view recent concerns surrounding slower Coach brand sales in China due to a luxury sales slowdown in the region as overblown and tariff worries as unfounded (only a MSD % of production in in China),” Hutchinson added.
Source: BAML
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