Volatility in the stock markets is not necessarily inherently bad. In fact, often when volatility falls too low for an extended period, investors get lulled into a false sense of security and big market drops can hit. That is hardly the case now as the volatility index, or VIX, has remained elevated since the beginning of the year, and many on Wall Street believe it will stay that way for the foreseeable future.
In the weekly report from Jefferies that highlights their top value picks, we found four companies that also should be somewhat resistant to spikes in volatility and make good sense for investors to consider now. All are rated Buy at Jefferies.
Ingersoll-Rand
This is one of the many top companies that restructured and are based in Ireland. Ingersoll-Rand PLC (NYSE: IR) is a top industrial stock pick at Jefferies, and with the housing market continuing to grow, the company’s wide range of portfolio products should continue to sell well.
Many on Wall Street also see the stock as a good play on the replacement, upgrade and ultimately growth in the commercial and residential air conditioning markets. Trends in these markets have been highly correlated with overall commercial construction and are thus earlier in the cycle.
Ingersoll Rand has an outstanding portfolio of global brands and holds leading market share in all major product lines. The geographic and industrial diversity coupled with a large installed product base provides solid growth opportunities for the company within service, spare parts and replacement revenue streams.
Ingersoll-Rand investors are paid a 2.38% dividend. The Jefferies price target for the stock is $65, and the Thomson/First Call consensus target is $64.24. Shares closed on Tuesday at $50.59 apiece.
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Raytheon
This company has a diversified mix of business and posted solid second-quarter numbers as well. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services. It operates in four principal business segments: Integrated Defense Systems, Intelligence, Information and Services, Missile Systems, and Space and Airborne Systems
The company is not only likely to benefit from domestic defense purchasing, but it has posted large contract sales to the Saudis over the past two years. Last year, Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services to clients.
Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as cybersecurity and a broad range of mission support services.
Raytheon investors are paid a 2.26% dividend. The Jefferies price target is $133, and the consensus target is $136.63. The shares closed Tuesday at $119.53.
Team Health
This is a top health care company that could surprise to the upside. Team Health Holdings Inc. (NYSE: TMH) is a leading provider of outsourced physician staffing solutions for hospitals in the United States. Through its 21 regional locations and multiple service lines, Team Health’s more than 14,000 affiliated health care professionals provide emergency medicine, hospital medicine, anesthesia, urgent care and pediatric staffing and management services to approximately 1,000 civilian and military hospitals, clinics and physician groups in 47 states.
The Jefferies team feels that the company’s acquisition of IPC Healthcare is viewed by Wall Street as too expensive. They feel differently and think that the synergies of the combination will really start to show up over the next two years, and it also gives the company a greater exposure to Medicare bundling.
Jefferies has a $65 price target. The consensus target is $61.53, and shares closed Tuesday at $41.84.
Vista Outdoor
With all the sabre rattling over gun control, this is one of the many stocks benefiting from the concern. Vista Outdoor Inc. (NASDAQ: VSTO) designs, manufactures and markets consumer products for the outdoor sports and recreation markets in the United States and internationally. It operates through two segments. The Shooting Sports segment designs, develops, produces and sources ammunition for the hunting and sport shooting enthusiast markets, as well as for local law enforcement.
The Outdoor Products segment offers binoculars, trail cameras, target systems, mounts, game calls, decoys, blinds, safety and protective eyewear products, fashion and sports eyewear products, laser rangefinders, archery accessories, riflescopes, hunting laser rangefinders, gun care products, reloading equipment, gun powder and targets.
The Jefferies team note the increased demand for firearms and ammunition given recent events and feel that this stock could have additional upside. They think trading at eight times EBITDA, the solid earnings growth could push that multiple to a still reasonable 10 times EBITDA.
The Jefferies price target is posted at $55. The consensus target is $51.69. Shares closed Tuesday at $44.69.
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None of the stocks scream momentum and overbought. They all offer solid earnings growth and lower volatility for accounts looking to minimize big portfolio fluctuations. They all make sense for long-term equity holders.
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