With the end of the trading year just a short two weeks away, many of our readers are making adjustments to portfolios. With the Nasdaq the only index up for the year, now may be a great time to look at new ideas to swap for this year’s losers. A new report from the analysts at Jefferies focuses in on some top growth ideas that could be poised to jump smartly in 2016.
The Jefferies team noted in their recent research report that the NYSE composite advance-decline line was at the lowest level since the end of September, after which the market promptly staged an impressive 10% rally. Typically after such a huge advance/decline like last Fridays -530, the market trades higher with the median one month performance of +2.7%.
Here are four top growth stocks to Buy now from Jefferies.
Bluebird Bio
This stock was crushed recently and is down a stunning 73% since late May. Bluebird Bio Inc. (NASDAQ: BLUE) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. The company’s product portfolio includes five approved products and multiple clinical and preclinical product candidates.
The company presented disappointing gene therapy data recently at the American Society of Hematology. Some Wall Street analysts are standing their ground and think the data presented are actually promising. They cite the reduction in transfusions required, which suggests solid clinical relevance and that the company may have demonstrated success. Jefferies noted that the LentiGlobin update showed modest efficacy in sickle cell disease and BT, but cautions that additional protocol modification will be required to achieve optimal efficacy.
Needless to say, the company will have to produce additional positive data to help alleviate investor concerns. However, other Wall Street analysts pointed out that the issues are solvable and that the company has significant resources to do so. Caution is advised, as any failure to produce solid clinical data could be very damaging to the company and the stock.
The Jefferies price target is lowered to $96, and the Thomson/First Call consensus target is $129.32. The shares closed Tuesday at $59.97.
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Electronic Arts
This leading video game developer should benefit from not only the continuing rise in new console sales, but the rising trend of mobile gaming. Electronic Arts Inc. (NASDAQ: EA) produces top-selling games and related content and services under the EA brand in various categories, including action-adventure, role-playing, racing and first-person shooter games.
The company, which is very well known for its EA sports games like Madden Football, has made the move into mobile play by adapting many of the top franchise titles, which have been popular for years, into the mobile arena. The company reported solid third-quarter earnings and raised its guidance for Star Wars Battlefront to 13 million units. Many analysts feel that is a very beatable number.
The stock fell hard last week after GameStop cut the price of Star Wars Battlefront. Many feared that it suggested weakness in sales, but Jefferies feels that it looks like a pre-planned promotion designed to build the largest mass market audience possible. With the movie set to open this week, that makes good sense.
Wall Street analysts also noted that Madden NFL 16 also placed two SKUs in the top 20 over the over the three-day Black Friday weekend. This came without the aggressive discounting that the company has offered over the past four years.
Jefferies has a $95 price target, which is higher than the consensus target of $82.68. The stock closed Tuesday at $72.33.
KKR
This could be an outstanding buy for more aggressive growth and income investors. KKR & Co. L.P. (NYSE: KKR) is a leading global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. It aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business.
Jefferies makes the case that about 70% of the company’s stock value is accounted for in book value, in which the firm expects to see solid growth in over the next three to five years. Over the past five years, KKR has tripled the number of strategies it offers and more than doubled capabilities within the capital markets segment. While the distribution is being cut, Jefferies feels that the capital that is retained will lead to higher growth rates in the future.
KKR investors currently receive a 10.03% dividend, which dropped to a fixed quarterly distribution of 16 cents per unit for 2016. That translates to a still solid 4.43% at current prices. Jefferies initiates the stock with a Buy rating and a $20 target price. The consensus price objective is $23.27. The stock closed most recently at $15.23.
Western Alliance Bancorp
The Jefferies team likes this top small-cap bank. Western Alliance Bancorp. (NYSE: WAL) is one of the fastest-growing bank holding companies in the United States. Its primary subsidiary, Western Alliance Bank, is the go-to bank for business. It succeeds with local teams of experienced bankers who deliver superior, personalized services and a full spectrum of deposit, lending, treasury management and online banking products and services under the Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank and Torrey Pines Bank banners.
Jefferies says that despite slower-than-expected loan growth, the bridge loan business remains good and the company’s access to the Silicon Valley economy, which is booming, is a big positive. Despite a so-so third-quarter report, company management is comfortable with current guidance, and the net interest margin is expected to rise regardless of any action taken by the Federal Reserve.
The $41 Jefferies price target compares to a $38.67 consensus target. The shares closed on Tuesday $36.73.
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These stocks could be great portfolio additions for 2016. They have outstanding upside potential and somewhat limited downside at this juncture. That is appealing for investors who have suffered a difficult 2015.
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