Jefferies Makes Big Changes to Franchise Picks Stock Portfolio

By Lee Jackson Updated Jan 13, 7:42AM EST · Published May 23, 10:35AM EDT

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Jefferies Makes Big Changes to Franchise Picks Stock Portfolio — © Thinkstock

[cnxvideo id=”655411″ placement=”ros”]With the market just a few weeks away from the proverbial summer doldrums, which by the way, could be less dull this year, many of the top firms we cover on Wall Street continue to make changes to their high conviction stock lists. With the first-quarter earnings pretty much digested, and expectations for the balance of the year a little clearer, it’s not surprising to see some adjustment.

In a new research report, Jefferies analysts make some big changes to the firm’s Franchise Picks stock list. The Franchise Picks have outperformed the S&P 500 solidly, not only this year up over 5% to the index, but also since inception. The list remains a solid combination of growth and value companies, and the selections make good sense for long-term stock investors.

One exciting company is added and two are removed, one of which was spun off from a member that remains.

Dish Network

The Jefferies team and others on Wall Street think the value of the company’s spectrum is significantly undervalued by the market, and the stock was added to the Franchise Picks list. Dish Network Corp. (NASDAQ: DISH), through its subsidiaries, provides approximately 13.909 million pay-TV subscribers, as of Sept. 30, 2015, with the highest-quality programming and technology with the most choices at the best value. Dish offers a high definition line-up with more than 200 national HD channels, the most international channels and award-winning HD and DVR technology.

Dish also offers its Sling TV services that require an internet connection and are available on streaming-capable devices, including TVs, tablets, computers, game consoles and smartphones, primarily to consumers who do not subscribe to traditional satellite and cable pay-TV services. Additionally, the company operates Sling International, which offers over 200 channels in 18 languages. The Sling domestic package consists of over 20 channels and tiers of programming, including sports, kids, movies, world news, lifestyle and Spanish language, and premium content, such as HBO.
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The Jefferies rationale for adding the stock to its Franchise Picks is that the analysts feel that Dish’s mid-band spectrum is extremely valuable. The company’s mid-band spectrum is apparently very well placed for data growth and enhancing network capacity, and the analysts feel that carriers would definitely show up. They also note that there is limited visibility into the next major spectrum that could come to the market, but they say that Dish has the only nationwide, sizable spectrum that would fit with the four national carriers network requirements. They value the spectrum at a massive $45 billion, or a tax adjusted $32 billion. That compares with a current enterprise value for the company of $32 billion.

The Jefferies price target for the stock is a massive $80. The Thomson/First Call consensus price target is much lower at $72.10. The stock closed Friday at $46.49, up almost 5% on the day.
WisdomTree Investments

Despite some positives, this company was removed from the Franchise Picks list. WisdomTree Investment Inc. (NASDAQ: WETF) continues to benefit from the movement towards exchange traded funds (ETFs). This is especially true with the specialized currency hedged products, with the potential for significant uptake in interest rate hedged products.

WisdomTree is run by Jonathan Steinberg, the son of famous Wall Street financier Saul Steinberg. He is also married to Maria Bartiromo who became very famous on CNBC and now works for the Fox Business Network. Steinberg has a long and very distinguished ETF background, going back to the product’s infancy.

The stock has been crushed since the highs printed last summer, and it is down a stunning 58%. Despite posting inline first-quarter results, the stock has continued to act poorly. The company did announce that it is boosting the stock buyback program.

WisdomTree investors are paid a 2.94% divided. The stock remains rated Buy, and the Jefferies price target is posted at $13. The consensus target price is $11.75. Shares closed most recently at $10.87.

Ingevity

This company was also removed from the list and was not rated by Jefferies, though its parent company remains a Franchise Pick. Ingevity Corp. (NYSE: NVGT) was recently spun out from WestRock Co. (NYSE: WRK), which last year completed and merged Rock-Tenn and MeadWestvaco. WestRock became the second-largest U.S. packaging company, valued at $10.7 billion, trailing only International Paper with its market capitalization of just under $15 billion. WestRock is expected to generate net sales of $15.7 billion and adjusted EBITDA of $2.9 billion. This includes the impact of $300 million in estimated annual synergies, to be achieved over three years.

Ingevity was the company’s specialty chemical business, and WestRock shareholders received one common share of Ingevity for six common shares of WestRock held at the close of business on May 4, 2016.

WestRock remains on the Franchise Picks list, and the stock has performed well after hitting lows back in February. Although well off the post-merger highs from last year, the company does remain a pretty compelling value, especially if the economy improves.

WestRock shareholders are paid a solid 3.96% dividend. The Jefferies price target is posted at $56, and the consensus target is $70.56. The shares closed most recently at $37.90 apiece.
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Jefferies continues to fine tune what has been a very solid set of high conviction stocks for its customers. We will continue to follow the portfolio and advise our readers of any changes in the future.

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.