By all measures stocks are expensive. That doesn’t mean you shouldn’t own them. What it means is that if there is some sort of ancillary black swan type of event, say a terrorist attack like 9/11, they are prone to a big hit. While that is unlikely, it makes sense for investors looking to put new capital to work to search for stocks that are reasonable and have solid upside potential.

In a recent research report from Jefferies, they zero in on some top stocks to buy that also have value characteristics. Those characteristics make them solid additions for investors with growth portfolios looking to employ capital now, but not wanting to chase momentum companies. All four are rated Buy at Jefferies:

Cisco

This is one of the top mega-cap technology stock picks on Wall Street. Cisco Systems, Inc. (NASDAQ: CSCO) designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide. It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points, and servers; and next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice, and video applications.

 

Cisco offers service provider video infrastructure, including set-top boxes, cable/telecommunications access products, and cable modems; and video software and solutions. In addition, it provides collaboration products comprising unified communications products, conferencing products, telepresence systems, and enterprise mobile messaging products; data center products, such as blade, rack, and modular servers, fabric interconnects, software, and server access virtualization solutions; security products, including network and data center security, advanced threat protection, Web and email security, access and policy, unified threat management, and advisory, integration, and managed services; and other products, such as emerging technologies and other networking products.

The company reported disappointing earnings recently and gave guidance for the January quarter well below Wall Street estimates. The Jefferies team noted the company is typically conservative with guidance, and also said the numbers were affected by the company’s move to a Software-as-a-Service or SaaS recurring revenue model. While the analyst reduces numbers, they point to the product billings growth of 5% as a positive.

Cisco investors are paid a huge 3.45% dividend. The Jefferies price target is at $35, while the Wall Street consensus is set at $33.11. The shares closed on Friday at $30.15.

Computer Sciences Corporation

This top company was recently added to the Franchise Picks list and is expected to complete a merger with Hewlett Packard Enterprise Company (NYSE: HPE) next March. Computer Sciences Corporation (NYSE: CSC) provides innovative next-generation technology services and solutions that leverage deep industry expertise, global scale, technology independence and an extensive partner community. The company serves leading commercial and international public sector organizations throughout the world.

The Jefferies team thinks the merger could be 102% accretive to the year one earnings-per-share for the newly combined company, and they had this to say in a recent research report.

As we approach the March 2017 close date, we expect the shares could rally, and see catalysts even sooner, including: Hewlett Packard Enterprise to file Form 10 post the October 31st fiscal year end and the Computer Sciences Analyst Day in early 2017. Stock trades at about 7.7 times our new company earnings-per-share estimate, and we believe there could be upside to our cost synergy estimates.

Computer Sciences shareholders are paid a 1.07% dividend. The Jefferies price target for the stock is raised to $74 from $63, and the consensus target is posted much lower at $59.17. The shares closed Friday at $62.20.

DTE Energy

With the potential for a very cold winter on tap, this company may look to extending 2016 gains into next year. DTE Energy, Inc. (NYSE: DTE) is a Detroit-based diversified energy company involved in the development and management of energy-related businesses and services nationwide. Its operating units include an electric utility serving 2.1 million customers in Southeastern Michigan and a natural gas utility serving 1.2 million customers in Michigan. The DTE Energy portfolio includes non-utility energy businesses focused on power and industrial projects, natural gas pipelines, gathering and storage, and energy marketing and trading.

The company recently declared an $0.825 per share dividend on its common stock payable Jan. 15, 2017, to shareholders of record at the close of business Dec. 19, 2016. That is a $0.055 per share or a 7.1 percent, an increase from the previous quarterly dividend of $0.77 per share and reflects the Board’s confidence in the company’s growth plans. The new annualized dividend per share is $3.30, up from $3.08. This continues DTE Energy’s consistent dividend history, having issued a cash dividend for more than 100 years.

DTE shareholders are paid a very solid 3.62% dividend. Jefferies just initiated the stock at a Buy citing the company as a best-in-class utility, with a price target posted at $102. The consensus number is at $99.88. The stock closed Friday at $91.22.

First Data

The Jefferies team initiated coverage of this company earlier in the fall with a Buy rating. First Data Corporation, Inc. (NYSE: FDC) provides electronic commerce solutions for merchants, financial institutions, and card issuers worldwide. It operates through three segments: Global Business Solutions, Global Financial Solutions, and Network & Security Solutions. The Global Business Solutions segment offers retail point-of-sale merchant acquiring and e-commerce services; and next-generation offerings, such as mobile payment services and web store-in-a-box solutions, as well as its cloud-based Clover point-of-sale operating system, which includes a marketplace for proprietary and third-party business applications.

The Global Financial Solutions segment provides credit solutions for bank and non-bank issuers, including credit and retail private-label card processing solutions; and licensed financial software systems, such as VisionPLUS bank processing application and lending solutions. This segment also offers a suite of related services, including card personalization and embossing, statement printing, client service, and remittance processing services to financial institutions.

The Network & Security Solutions segment provides various value-added solutions, which include electronic funds transfer network solutions, such as debit card processing solutions; stored value network solutions; and security and fraud management solutions. This segment also supports its online and mobile banking digital strategies, and its business supporting mobile wallets.

The Jefferies price target is posted at $18.50, and the consensus is at $17.06. The shares closed Friday at $15.48.

The bottom line for investors looking to add stocks now is go with growth companies with a value edge. Any way you cut it, shares are expensive, and playing things a little safer now makes good sense.

 

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