What an enjoyable ride it has been: eight years of almost non-stop gains for equity investors, and for some who were in the right technology stocks, monumental performance unlike almost any other time period. There is a problem though. Like all good things, this probably will come to an end. And while it may not be a 1987 or 2000 or even 2009 meltdown, the fantastic year-over-years gains could shrink, and shrink big time.

Interest rates should continue to stay low, even with the Federal Reserve raising them in December and as many as three times in 2018. That would leave the Fed Funds rate at just 2.25%, which is still historically very low. That means stocks may continue to be a good asset to be in, but with a lower portfolio weighting, and perhaps a move to value over growth.

Jefferies has focused in on four value plays that look like they could be excellent stocks to own going into 2018. All are rated Buy, and all make good sense for growth investors looking to rotate to lower multiple value plays.

AT&T

This company has bounced off the lows, but is still down from highs in January. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV. The company has TV customers in the U.S. and 11 Latin American countries. In the U.S., the AT&T wireless network has the nation’s self-described strongest and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. Trading at a very cheap 12.8 times estimated 2018 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans.

AT&T has several major catalysts that will likely drive strong network traffic demand: DirecTV Now and Mobile, “Data-Free TV” for DirecTV/U-Verse subscribers, and increasing penetration of unlimited data plans. Many on Wall Street believe that the company is well positioned to address ongoing traffic requirements, with additional LTE capacity available and the ability to leverage small cell deployments.

The company posted solid numbers for the third quarter, but between concerns over the Time Warner deal risk, and the overhang from the arbitrage accounts, the stock has been in a funk.

AT&T investors are paid a huge 5.68% dividend. Jefferies has a Buy rating on the shares and a big $48 price target. The Wall Street consensus is $39.68. The shares closed on Friday at $34.51.

Cisco

This is a top mega-cap technology stock pick that makes good sense for investors seeking tech exposure. 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 as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice, and video applications.

Wall Street likes the company’s stellar balance sheet, and the ability for gross margins to head close to the 65% range on a consistent basis as it moves away from the legacy products sold for switching and routing. Cisco is a company that could benefit from the corporate tax rate being lowered on overseas money as it has a whopping $70.49 billion in cash, 90% of which is overseas.

The tech giant reported solid results last week, and the analysts said this in their research report:

Company reported earnings last week. Sales and earnings per share were slightly ahead of Street expectations and management guided for 1 to 3% growth in January sales. One has to look back to October 2015 to see year-over-year growth in the business and it’s also unusual to see them guide above the Street. We raise the price target, which is based on 13.3x our base business, ex-cash calendar 2018 earnings per share estimate.

Shareholders are paid a solid 3.23% dividend. The Jefferies target price is lifted to $40, and that compares with the Wall Street consensus of $38.70. The stock closed trading on Friday at $35.90.

C&J Energy Services

This smaller cap company is well liked across Wall Street desks. C&J Energy Services
(NYSE: CJ) is a completion and production services company for the oil and gas industry. It operates through three segments: Completion Services, Well Support Services and Other Services.

The company also manufactures, repairs and refurbishes equipment used in the oilfield services industry. It operates in various North American onshore basins. Its Completion Services segment includes hydraulic fracturing services, cased-hole wireline services, coiled tubing services and other well stimulation services. Its Well Support Services segment includes rig services, fluid management services and other special well site services.

The Jefferies analysts said this in their report:

We revisited top picks among the pressure pumpers following third quarter earnings. CJ becomes our top pick in the group. CJ trades a full turn below ProPetro and 1/2 turn below the average of the pumpers. We believe their coiled tubing and cementing businesses could be higher returning than fracking and we continue to model healthy free cash flow generation for the pumpers in 2018.

The Jefferies price target for the stock is $38, and the Wall Street consensus is set at $39.33. Shares closed Friday at $29.74.

Peabody Energy

This is an out-of-favor play that could be back in favor in 2018. Peabody Energy Inc. (NYSE: BTU) is engaged in the mining of thermal coal for sale primarily to electric utilities and metallurgical coal for sale to industrial customers. Its mining operations are located in the United States and Australia.

Peabody’s segments are Powder River Basin Mining, Midwestern U.S. Mining, Western U.S. Mining, Australian Metallurgical Mining, Australian Thermal Mining, Trading and Brokerage, and Corporate and Other. It also markets and brokers coal from other producers, both as principal and agent, and trades coal and freight-related contracts through offices in Australia, China, Germany, India, Indonesia, the United Kingdom and the United States.

It’s been a long road back for the company, and the analysts noted this in their research:

The company has re-emerged from bankruptcy and though thermal coal demand in the US may be in secular decline, free cash flow remains strong. The balance sheet is much improved and management initiated a $500 million buyback program in August and we expect a dividend to be initiated in the first quarter of 2018. We conservatively forecast a 20% decline in Peabody’s average realized prices for coal over the next five years, but find the current free cash flow and capital returns compelling.

The Jefferies price target is 38, and the consensus is posted at $37.57. The shares closed Friday at $31.49.

Four stocks that look like far better choices for 2018 than high-flying momentum companies. All make sense for investors looking to rotate to companies that are more of a value proposition.

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