The Merrill Lynch list contains eight stocks rated Buy and two rated Underperform. We screened the stocks rated Buy for the ideas with the most upside to the Merrill Lynch price target. They are: Anadarko Petroleum Corp. (NYSE: APC), HCA Holdings Inc. (NYSE: HCA), NVIDIA Corp. (NASDAQ: NVDA) and United Technologies Corp. (NYSE: UTX).
Anadarko Petroleum
Not only is this a top stock to buy at Merrill Lynch, but some think the company remains a very possible acquisition target. Anadarko is one of the biggest independent oil and gas producers in the country, with exploration or production work in all major domestic drilling areas, as well as in South America, Africa, Asia and New Zealand.
The Merrill Lynch team sees the company focusing on asset management by disposing of non-core business silos. More master limited partnership drop-downs are providing a source of funding and cash flow that may ultimately be returned to shareholders. They also see exploration returning to the forefront.
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Anadarko investors are paid a 1.3% dividend. The Merrill Lynch price target for the stock is $103. The Thomson/First Call consensus price target is at $96.52. Shares closed Wednesday at $83.86.
HCA Holdings
Its stock trades at a low 15 times estimated 2015 earnings, and HCA has scale advantages as the largest private hospital operator in the United States and is diversified geographically. The company also benefits from local market density, with the number one or two market share in most of its local markets. Many on Wall Street agree that increasing Medicaid enrollment and the potential for additional states to expand Medicaid eligibility could provide upside to HCA’s model and provide built-in growth for 2015.
The Supreme Court decision on the case that challenges exchange subsidies in states using the federal exchange is expected in June, and the analysts feel that a negative decision is already priced into the stock. If the decision is positive, they feel the stock could rally. They also think the company has given very conservative earnings guidance, which means results could be much better than expected.
Merrill Lynch has an $85 price target, essentially in line with the $85.76 consensus estimate. The stock closed the day Wednesday at $74.85.
NVIDIA
This is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles. NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. NVIDIA has a technology partnership with electric car maker Tesla and posted very strong earnings last week.
The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.
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Like many tech companies, the fallout from lower personal computer sales has been a headwind. The Merrill Lynch team thinks Intel and other PC companies may advise Wall Street the damage may be limited to the first quarter, which could spark a rally. They also think the weak market could force competition to cut investments, which could help NVIDIA continue to gain share.
Investors are paid a 1.6% dividend. The Merrill Lynch price objective is $28, and the consensus target is $23.24. The stock closed Wednesday at $21.01.
United Technologies
United Technologies provides high-tech products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems, Pratt & Whitney and Sikorsky. Since peaking in late February, the stock has rolled over and not acted well. The Merrill Lynch analysts believe the company is strategically positioned to benefit from two megatrends in the long-term: urbanization and commercial aerospace.
The catalyst the analysts cite is a possible spin-off of Sikorsky, or a sale to a strategic buyer. Either could be a boost to shareholder returns. They expect the review process for the possible deal could be concluded by the end of this year.
United Technologies shareholders are paid a solid 2.2% dividend. The Merrill Lynch price target is set at $140, and the consensus target is lower at $132.25. Shares closed Wednesday at $115.92.
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All these companies are good buys for growth portfolios, even in none of the catalysts make a difference. That is what makes the potential so inviting for investors in an overall pricey market.
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