The people who were late to the fear of missing out “buy momentum” club have gotten a hard lesson in stock market investing recently. With the Nasdaq at the 10% correction level in less than a week, it makes sense for investors to consider looking at other stock strategies, and one that has been out of favor for years may be coming back in vogue.
It’s been years since value investing was in style, but that trend may be coming to an end. Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating.
The analysts at BofA Securities have 10 top value picks for the firm’s clients, and five look like great ideas for growth investors looking to steer away from the momentum stocks for a while, especially as we get closer to the November election. Given the rancor over the election, and the numerous items in the headlines, you can bet volatility will continue to move higher as we approach November.
While all five of the top value picks 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.
Positions in health care should continue to act well, and this is a market leader. HCA Healthcare Inc. (NYSE: HCA) offers health care services. The company serves patients in the United States, operating from its network of approximately 185 hospitals and 2,000 sites of care. Its hospitals provide diagnosis, treatments, consultancy, nursing, surgeries and other services, as well as medical education, physician resource centers and training programs.
With its founding in 1968, HCA Healthcare created a new model for hospital care in the United States, using combined resources to strengthen hospitals, deliver patient-focused care and improve the practice of medicine. The company has conducted a number of clinical studies, including one that demonstrated that full-term delivery is healthier than early elective delivery of babies and another that identified a clinical protocol that can reduce bloodstream infections in ICU patients by 44%.
BofA Securities has set a very large $172 price target on the shares, while the consensus across Wall Street is $147.19. The closing price of HCA stock on Tuesday was $132.53 a share.
Insurance never goes out of style, and this is one of the top companies in the industry. Lincoln National Corp. (NYSE: LNC) operates multiple insurance and retirement businesses in the United States. It operates through four segments.
The Annuities segment offers variable, fixed and indexed variable annuities. The Retirement Plan Services segment provides employers with retirement plan products and services, primarily in the defined contribution retirement plan marketplace. This segment offers individual and group variable annuities, group fixed annuities and mutual fund-based programs, as well as a range of plan services, including plan recordkeeping, compliance testing, participant education, and trust and custodial services.
The Life Insurance segment provides life insurance products, including term insurance, such as single and survivorship versions of universal life insurance. It offers variable universal life insurance, indexed universal life insurance products and a critical illness rider.
The Group Protection segment offers group nonmedical insurance products, comprising short-term and long-term disability, statutory disability and paid family medical leave administration and absence management services, term life, dental, vision and accident, and critical illness benefits and services to the employer marketplace through various forms of employee-paid and employer-paid plans.
Investors receive a 4.47% dividend. The BofA Securities price objective is $44, and the consensus target price is $44.64. Tuesday’s closing price for Lincoln National stock was $35.82.
This is a very solid way for more conservative accounts to play the energy sector, and it is another U.S. Conviction list stock. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.
Until just recently, the company operated approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.
In August, the company announced it would sell Speedway to 7-11 in an all-cash deal valued at $21 billion, or $16.5 billion after-tax. The sale transforms the company’s balance sheet and creates options to revisit the corporate structure of MPLX. Many across Wall Street feel that with Speedway removed, the dislocation in refining value becomes even more transparent as the company trades much cheaper than its industry peers do.
Shareholders receive a robust 7.18% dividend. The whopping $66 BofA Securities price target is well above the $48.57 consensus target. Marathon Petroleum stock closed at $32.33 on Tuesday.
This is one of Wall Street’s white-glove firms, and it may be among the best buys in the banking and investment arena. Morgan Stanley (NYSE: MS) is a global investment bank with leading positions in investment banking (M&A and equity underwriting), equity trading and wealth management, which contributes nearly 50% of firmwide revenues. The firm also has an asset management business, which adds to the lower-risk business profile the firm has pursued since the financial crisis.
Earlier this year, the Wall Street investment bank agreed on a $13 billion purchase of discount brokerage E-Trade. With 5.2 million customers, it was once a revolutionary platform that “helped usher in a dramatic shift among financial services firms” and fueled the rise of indexes and exchange-traded funds, making investing vastly easier for do-it-yourself investors. The deal is still expected to close.
Investors receive a 2.79% dividend. BofA Securities has an $80 price target. The consensus target is $59.51, and Morgan Stanley stock closed at $50.17.
This company finally completed a long and arduous pursuit of former rival communication company Sprint. T-Mobile US Inc. (NASDAQ: TMUS) provides wireless services for branded postpaid, prepaid and wholesale customers in the United States, Puerto Rico and the United States Virgin Islands.
The company offers voice, messaging and data services. It also provides wireless devices, including smartphones, wearables, tablets and other mobile communication devices, as well as accessories and wireline services. It offers its services under the T-Mobile, Metro by T-Mobile and Sprint brands.
Now that the Sprint deal finally has closed, it could bring about a seismic shift in the mobile world. T-Mobile and Sprint’s combined assets could jump-start their 5G ambitions, pushing the industry further into the next-generation technology. They’ve also said they’ll lock in consumer prices for at least three years. As part of all the wrangling, Dish Network will become the fourth national carrier, giving consumers a new alternative.
The $130 BofA Securities price objective is less than the $134.05 consensus target. Tuesday’s last trade for T Mobile stock hit the tape at $111.57.
These five top value picks from BofA Securities offer investors well-known and successful companies that should continue to more than hold their own in today’s environment. All make sense for growth investors looking to add some value positions to portfolios.
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