Merrill Lynch Out With 10 Top US Stock Ideas for Q4

By Lee Jackson Updated Jan 13, 2:47AM EST · Published Oct 5, 8:20AM EDT

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Merrill Lynch Out With 10 Top US Stock Ideas for Q4 — © Thinkstock

[cnxvideo id=”625480″ placement=”ros”]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.

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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.

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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.

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.