If there has been a year that has been difficult to trade, it has been 2015. With the S&P 500 trading at about the same level it was at last November, and the lack of a 10% correction in over three years, some top stocks took it on the chin hard this year after being up big just months ago.
24/7 Wall St. wanted to revisit former high-flyers and sector leaders and see which ones look like solid buys in a market that is pricey, tired and wary of rate increases. We found four that warrant being revisited now for some potential big gains down the road.
Applied Materials
This semiconductor capital equipment leader has lagged the overall tech market over the past year. Applied Materials Inc. (NASDAQ: AMAT) is actually now trading below all the moving averages, and for patient investors may be a high-quality pick now. Applied Materials is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Its technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.
Merrill Lynch analysts are very positive on the stock and see it benefiting not only from the semiconductor side of the business, but also the larger, higher resolution and flexible screens on the display side of the business. Many on Wall Street were disappointed when the merger with Tokyo Electron was called off earlier this year, and the Merrill Lynch team points out the stock has been out of favor ever since.
ALSO READ: 4 Top Jefferies Growth Stocks to Buy Now
The company will report third-quarter earnings on Thursday, and most analysts are cautiously optimistic. Merrill Lynch recently pointed to the analysts day at Semicon West and commentary from peers on the robust chip cycle as upcoming very positive catalysts. The firm also sees the stock as a big restructuring story, at a very cheap bargain basement prices.
Applied Materials investors are paid a 2.31% dividend. The Merrill Lynch price target for the stock is $26. The Thomson/First Call consensus price target is at $23.67. Shares closed Tuesday at $17.34.
Southwest Airlines
This company continues to expand routes and remains a low-cost leader. Southwest Airlines Inc. (NYSE: LUV) continues to increase its brand awareness all over the country. With the domestic market showing reasonably good strength, and the pricing environment looking very solid for the rest of 2015, revenues should stay strong and continue to grow. Jet fuel prices that remain much lower than in past years and are almost 30% of Southwest’s total costs have been a key for improving revenues and earnings. With almost no international business at this time, currency headwinds are not an issue for the airline.
ALSO READ: UBS Makes Big Tech Stock Changes in Dividend Ruler Portfolio
CEO Gary Kelly recently said:
Our available seat-mile growth will be a little bit more than our seat growth, but it will be around 7 percent for this year; and likewise we will manage aggressively to the low end of that range for next year. Much of the growth in 2016 is simply carryover from 2015.
This has been a concern for some investors and probably relieves some anxiety of overcapacity.
Southwest shareholders are paid a 0.8% dividend. The UBS price target is $46, and the consensus target is higher at $49.71 The stock closed most recently at $38.36.
Micron Technology
This top technology stock has been absolutely mauled. Micron Technology Inc. (NASDAQ: MU) trades at a 3.38 price-to-cash-flow figure. Since January the stock is down a massive 50%, and over 30% since the end of June. Many on Wall Street feel at these lower levels the company is a potential takeover candidate.
Micron Technology is a global leader in advanced semiconductor systems. Its 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.
ALSO READ: 4 Jefferies Top Value Stock Picks to Buy Now
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 other mobile device.
The Jefferies price target is $33, above the $28.97 consensus target. Shares closed Tuesday at $17.88.
SunEdison
This top solar company is down over 50% in just three short weeks, after pushing higher since the beginning of the year. SunEdison Inc. (NYSE: SUNE) manufactures solar technology and develops, finances, installs and operates distributed solar power plants, delivering predictably priced electricity and services to its residential, commercial, government and utility customers. SunEdison also provides 24/7 asset management, monitoring and reporting services for hundreds of solar systems worldwide via its Renewable Operation Center. SunEdison and its yieldco, TerraForm Power, signed a definitive agreement in November to acquire First Wind for a total sum of $2.4 billion. The combined entity became one of the largest clean energy companies in the world.
The company recently bought Vivint Solar in a cash, stock and convertible securities deal. The Wall Street chatter is investors are wary of the buying binge and do not feel the company has the profits to support all the transactions. Plus, when it reported revenues last week it was higher than last year, but the net loss was massive.
RBC still has the stock rated as a Buy, with a $36 price target. The consensus target is $32. The shares closed Tuesday at an incredibly low $13.35.
ALSO READ: 5 US Stocks With Incredibly High Revenue Exposure to China
Catching the proverbial falling knife can be hard, but these are not penny-stock misfits. They are large, well-established companies. While clearly some are easier from a risk standpoint, they all could offer huge upside for patient, aggressive accounts.
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
