Despite where you may stand on the global warming argument, one thing is for sure, the climate on the earth is constantly changing. In fact between 1700 and 1850, the world experienced what scientists have called the “Little Ice Age.” A new Merrill Lynch research report highlights the companies that will be a major part of what the analyst calls the climate change solution for a transforming world.
One area we thought made sense for 24/7 Wall St. readers was the energy-efficient arena. The Merrill Lynch team has four top companies that are rated Buy that could play a big part in this crucial and growing silo. It is important to note that the entire sector will be in focus as the giant UN climate conference in Paris, dubbed COP 21, with major world leaders, including President Obama, in attendance has just convened. Negotiators from 195 countries will try to reach a deal within two weeks aimed at reducing global carbon emissions and limiting global warming.
Advanced Energy Industries
This stock had solid bounce off the late August lows and is breaking through near 52-week highs. Advanced Energy Industries Inc. (NASDAQ: AEIS) is a global leader in innovative power and control technologies for high-growth, precision power solutions for thin films processes and industrial applications. The company announced earlier this month it had entered into an accelerated share repurchase program in keeping with the company’s overall capital deployment strategy. This is very bullish for shareholders.
ALSO READ: Jefferies Has 4 Blue Chip High-Dividend Franchise Picks to Buy Now
Merrill Lynch sees the company as a big player in the power management area. The firm also noted recently, while the company posted strong third-quarter results, the fourth quarter guidance was below estimates. Merrill Lynch views it as a temporary slowdown for a stock with very bright long-term prospects.
Merrill Lynch has a $35 price target on the stock, and the Thomson/First Call consensus target is $32.57. The shares closed Friday at $29.15.
ARM Holdings
This top company licenses the chip designs and the ARM instruction set architectures to third parties, who design their own products that implement one of those architectures. ARM Holdings PLC (NASDAQ: ARMH) is enabling the development of new markets and transformation of industries and society, invisibly creating opportunity for a globally connected population. The company’s scalable, energy-efficient processor designs and related technologies deliver intelligence wherever computing happens, ranging from sensors to servers, including smartphones, tablets, digital TVs, enterprise infrastructure and the Internet of Things (IoT).
Many on Wall Street are anxious to get updates on the following: Potential licensable networking focused processes, more color on the trends that led ARM to raise networking and server market shares targets for 2020, and the potential for mbed server monetization for IoT applications. The analysts feel that the IoT applications will be big in energy efficiency.
Investors receive a small 0.65% dividend. The Merrill Lynch price target is $59. The consensus target is $56.73. Shares closed Friday at $50.32.
General Electric
This iconic blue chip industrial has been on a strong roll this year. General Electric Co. (NYSE: GE) is a highly diversified, global industrial corporation. Its products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance. The Merrill Lynch analysts feel that the American giant will be a large player in the efficient energy field.
The company is in the middle of a huge plan that is scaling back many of its operations and returning capital to shareholders. GE announced a restructuring plan earlier this year that includes buying back up to $50 billion of its shares, selling about $30 billion in real estate assets over the next two years and divesting more GE Capital operations.
ALSO READ: 4 Deutsche Bank Top Pick Energy Stocks to Buy on Big Oil Pullback
The repurchase program, which will be partly funded by $35 billion through money returned from GE Capital, is the second-biggest in history after Apple’s $90 billion plan. GE, which had 10.06 billion shares outstanding on Jan. 31, said it expected to reduce that by as much as 20% to 8 billion to 8.5 billion by 2018.
GE investors receive a solid 3% dividend. The Merrill Lynch price target is $33, and the consensus target is $31.15. Shares closed Friday at $30.36.
Ingersoll-Rand
Based in Ireland, Ingersoll-Rand PLC (NYSE: IR) is a top industrial stock to Buy at Merrill Lynch. With the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well. Many on Wall Street also see the stock as a good play on the replacement, upgrade and, ultimately, growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction and are thus earlier in the cycle.
Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.
Ingersoll-Rand investors receive a 2% dividend. The $70 Merrill Lynch price target is higher than the consensus target of $65.60. Shares closed on Friday at $56.48.
ALSO READ: Merrill Lynch’s 4 Top Pharmaceutical Dividend Stocks to Own for 2016
These are all solid ways for investors to play the energy efficiency theme, which should continue to be extremely important in the years to come. These companies are also outstanding ways for more conservative growth accounts to become involved.
Top Gaining Stocks
Top Losing Stocks