3 Top Jefferies Value Stock Picks to Buy Now

By Lee Jackson Updated Jan 13, 4:31PM EST · Published Dec 3, 9:40AM EST

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3 Top Jefferies Value Stock Picks to Buy Now — © Thinkstock

For the first time in a long time, some value stocks have outperformed growth stocks. Given that many on Wall Street see only mid to upper single-digit gains going forward for the markets in 2016, now may be a good time to consider moving some higher beta growth stocks to value.

Each week we cover the new value calls from the analysts at Jefferies, and more and more, some of the calls may look surprising as some solid big blue chip companies are becoming so cheap on a multiple basis they are ending up in the value arena. This is the best of both worlds for investors, when large cap growth companies become inexpensive enough to have a value call.

Here are three of this week’s value stocks to buy from Jefferies. All are rated Buy.

KeyCorp

This smaller large-cap bank makes good sense now. KeyCorp. (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals and small and medium-sized businesses. It also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndication and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

While some earnings reports this year have been below the Wall Street estimates, most analysts feel they were driven largely by higher expenses. Jefferies feels that with the stock being sold off on the First Niagara Financial Group purchase, which was pegged at $4.1 billion, the valuation is incredibly cheap at 9.3 times 2017 estimated earnings. The firm also notes that it lowers the exposure to investment banking fees.

KeyCorp investors are paid a nice $2.26% dividend. The Jefferies price target is posted at $15.50, and the Thomson/First Call consensus target is $14.94. The shares closed Wednesday at $13.13.

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Hewlett Packard Enterprise

This company was recently part of the big split in operations at the iconic Hewlett-Packard. Hewlett Packard Enterprise Co. (NYSE: HPE) is now an industry leading technology company that enables customers to go further, faster. With the industry’s most comprehensive portfolio, spanning the cloud to the data center to workplace applications, the company’s technology and services help customers around the world make IT more efficient, more productive and more secure.

The company recently announced a new partnership with Microsoft to offer new innovation in hybrid cloud computing through Microsoft Azure and Hewlett Packard Enterprise infrastructure and services, as well as new program offerings. The extended partnership appoints Microsoft Azure as a preferred public cloud partner.

Jefferies liked the company’s solid recent earnings, which were in line with estimates. The company reported impressive profitability in services, where operating margins were 8.2%, versus Wall Street’s 6.8% estimate. The company also kept free cash flow and earnings estimates for 2016 unchanged, and the stock trades at a dirt cheap seven times 2016 fiscal estimates.

The Jefferies price target is $19.50, and the consensus target is $16.43. The stock closed most recently at $14.95.

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Viacom

Top media companies were hit hard earlier this year over fears of consumers “cutting the cord” or leaving cable and satellite programming. Viacom Inc. (NASDAQ: VIAB) creates television programs, motion pictures, short-form video, applications, games, consumer products, social media and other entertainment content. Its approximately 230 programmed and operated TV channels include MTV, VH1, CMT, Logo, BET, Nickelodeon, Nick at Nite, Comedy Central, TV Land, SPIKE, Paramount Channel and VIVA.

Earlier this year, Viacom delighted shareholders with a very rich 21% dividend increase. It has continued to reward shareholders and enhance its brands worldwide through the creation and acquisition of popular programs, new channels, successful motion pictures, and other forms of entertainment.

Jefferies notes that although the stock has outperformed peers over the past two months, it still trades at a very cheap multiple. It also cites easy year-over-year comparisons and new programming, which could improve domestic advertising growth as positives

Viacom investors receive a solid 3.33% dividend. The Jefferies price target is $60, and the consensus target is $59.09. The stock closed Wednesday at $47.65.

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These three stocks offer investors outstanding entry points into companies with well-established franchises. In what may be a still pricey market, they make good sense for growth accounts looking to add value, and are far safer than high-volatility momentum stocks.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.