The higher the market goes, the more dangerous it gets. However, given the alternatives, investors are likely to stay in, and they seem to buy every significant dip. Despite the rush to all-time highs, some top stock picks are turning into top value picks. A new research report from Jefferies highlights value stocks to buy this week.
The Jefferies team has truly found some noteworthy companies to buy, and some are Wall Street favorites that for one reason or another were sold off or have fallen out of favor. We screened the Jefferies list for the stocks with the biggest upside to the posted price targets.
AmeriGas Partners
This stock is a solid play on the propane industry. AmeriGas Partners L.P. (NYSE: APU) has the advantage of having a very large propane footprint. Propane usually trades at almost twice the price of spot natural gas. The consumer is often in a rural or outlying areas, and there is no major competition to speak of. AmeriGas operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. It serves approximately 2 million residential, commercial, industrial, agricultural, wholesale and motor fuel customers in 50 states through approximately 2,500 propane distribution locations.
The stock has been sold off pretty hard, and the Jefferies team sees this as a very solid buying opportunity. They also point out that unlike other master limited partnerships, this company is not constantly going to the equity markets to raise capital, and that is a big plus for unitholders.
AmeriGas investors are paid a very rich 7.77% distribution. The Jefferies price objective is $53, and the Thomson/First Call consensus target is $50.43. AmeriGas closed Monday at $47.37.
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Carrizo Oil & Gas
This company is a top energy stock for value buyers to consider. Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is a Houston-based energy company actively engaged in the exploration, development and production of oil and gas from resource plays located in the United States. Carrizo’s current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale, the Utica Shale in Ohio, the Niobrara Formation in Colorado and the Marcellus Shale in Pennsylvania.
Many on Wall Street see the company as one of the best positioned due to the low breakeven costs, solid operating scale and a very good balance sheet with ample liquidity. The analysts also think they company may take advantage of difficult situations for others, and make acquisitions, especially in the Eagle Ford.
The Jefferies team sees 13% oil growth next year, even if the company does not add a fourth rig in the Eagle Ford. They also are positive that the firm’s capital expenditures will prove to be accretive, points they suspect some on Wall Street are missing.
The Jefferies price target on the stock is $65, and the consensus target is $60.75. Shares closed Monday at $52.23.
Micron Technology
Micron Technology Inc. (NASDAQ: MU) is a global leader in advanced semiconductor systems. Micron’s broad portfolio of high-performance memory technologies, including DRAM, NAND and NOR flash, is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications.
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Micron and Intel announced recently the availability of their 3D NAND technology, the world’s highest-density flash memory. Flash is the storage technology used inside the lightest laptops, fastest data centers and nearly every cell phone, tablet and mobile device.
The Jefferies team feels that while DRAM pricing was weaker than expected in the first quarter, the company has taken solid supply-side actions, which should help firm pricing. They also think the trough is put in this quarter, and Micron trades at just 11 times trough earnings.
The Jefferies price target is set at $40, and the consensus target is $36.42. Shares closed Monday at $24.63.
United Rentals
This stock was spanked to the tune of 9% recently and may be offering investors a good entry point. United Rentals Inc. (NYSE: URI) is the largest equipment rental company in the world. The company has an integrated network of 876 rental locations in 49 states and 10 Canadian provinces. With approximately 12,200 employees, the company serves construction and industrial customers, utilities, municipalities, homeowners and others. It offers approximately 3,100 classes of equipment for rent.
Comments by company management at a brokerage conference hit the stock recently, and while the short term may be rough due to the continued slump in the energy sector, the Jefferies analyst feel that at 10 times fiscal 2016 estimated earnings the stock remains cheap. However, given a competitor’s recent data, the analysts do bring down their numbers and lower the target.
The Jefferies price target is lowered from $130 to $120, while the consensus target is much lower at $108.57. The stock closed Monday at $92.13.
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While by many traditional metrics these may not look like true value stocks to some investors, the Jefferies team has indeed found stocks that at current trading levels offer investors great value and upside potential.
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