As incredible as it may seem, we are already into October, as the last quarter of 2016 is upon us. In a year that has shown some big volatility, the S&P 500 is up almost 6%, with much of that gain driven by bond proxy sectors like telecoms and utilities. With the presidential election clearly the biggest market-moving item facing investors, many of the top firms we cover on Wall Street are out with their top ideas for the final three months of the year.
A recent Merrill Lynch research report features the firm’s top 10 ideas for the fourth quarter. Eight are stocks to buy and two are expected to underperform and could be short sale candidates. Here we focus on the long ideas, and at first glance, they look like outstanding picks for growth stock accounts.
American Tower
This top company printed an all-time high last November and has almost traded back to it, after being down to sideways for almost a year. American Tower Corp. (NYSE: AMT) is one of the largest global real estate investment trusts (REITs), as well as a leading independent owner, operator and developer of multi-tenant communications real estate with a portfolio of approximately 97,000 communications sites. It is on track to own and operate 100,000 cell towers by the end of 2015, in both U.S. and international operations. It is also reported that the company is already processing about 900 applications in its pipeline to add additional carriers to the newly acquired Verizon towers.
Shareholders receive a 2% distribution. The Merrill Lynch price target for the stock is $131. The Wall Street consensus target is $130. The shares closed Tuesday at $110.61.
Comcast
This broadcasting-related stock could have big upside potential. Comcast Corp. (NYSE: CMCSA) is one of the nation’s largest video, high-speed internet and phone provider to residential customers under the XFINITY brand and also provides these services to businesses. Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings.
Comcast investors receive a 1.67% dividend. The Merrill Lynch price target is $84. The consensus price objective is $75.70. Comcast closed trading on Tuesday at $65.83.
Devon Energy
This company is expected to have a substantial portion of its total 2016 production in natural gas, and it also resides on the US 1 list. Devon Energy Corp. (NYSE: DVN) an independent energy company, primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells. It also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensates through its natural gas pipelines, plants and treatment facilities.
Investors receive a 0.55% dividend. The $64 Merrill Lynch price target is well above the consensus target of $46.28. Devon closed Tuesday at $43.28.
General Dynamics
This company, like other major defense prime contractors, had a very solid year and makes the US 1 list. General Dynamics Corp. (NYSE: GD) is a worldwide aerospace and defense company, and it has over 96,000 employees worldwide. General Dynamics operates through four business groups: Aerospace, Combat Systems, Marine Systems and Information Systems and Technology. The U.S. government is its largest customer, which could continue to bode well if Congress does not change hands.
Investors are paid a 1.98% dividend. Merrill Lynch has a $170 price target, while the consensus estimate is $168.69. The stock closed at $153.55.
Home Depot
This company remains the undisputed leader in the home improvement retail category. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
Home Depot stores sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance and professional service programs to do-it-yourself (DIY), do-it-for-me (DIFM) and professional customers.
Home Depot investors receive a 2.15% dividend. Merrill Lynch has $158 price target. The consensus price objective is $150.55, and shares closed Tuesday at $128.20.
Eli Lilly
This top big pharmaceutical stock is also on the US 1 list. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
Shareholders are paid a 2.52% dividend. The Merrill Lynch price target is $108, and the consensus target is $97.80. Shares closed Tuesday at $81.11.
Under Armour
This apparel leader could have solid upside for investors. Under Armour Inc. (NYSE: UA) bills itself as the originator of performance footwear, apparel and equipment that has revolutionized how athletes across the world dress.
Designed to make all athletes better, the brand’s innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world’s largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal.
The Merrill Lynch price target is $54, and the consensus target is $53.62. Shares closed at $38.63.
Zoetis
This company rounds out the top long ideas for the quarter. Zoetis Inc. (NYSE: ZTS) engages in the discovery, development, manufacture and commercialization of animal health medicines and vaccines for livestock and companion animals in the United States and internationally.
The company offers anti-infectives that prevent, kill or slow the growth of bacteria, fungi, or protozoa; vaccines, which are biological preparations to prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; and parasiticides that prevent or eliminate external and internal parasites, such as fleas, ticks and worms.
Shareholders receive a 0.75% dividend. Merrill Lynch has a $60 price target. The consensus target is $54.92, and shares closed Tuesday at $38.49.
The ideas that are listed as Underperform are Lululemon Athletica Inc. (NASDAQ: LULU) and Mosaic Co. (NYSE: MOS).
Given that many of these top picks reside on its US 1 list, Merrill Lynch is putting out some of the firm’s highest conviction stock ideas for the fourth quarter. All are solid ideas for the short and long term.
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