The past year has been great for investors that poured money into the big U.S. multinationals, as those companies do a tremendous amount of sales overseas and were given the tailwind almost all year of a weaker dollar. That tailwind could be coming to an end as the Federal Reserve raised rates last week, and it could raise again as many as three, or even four times next year.
Higher interest rates should also mean a stronger dollar, and in a new research report Merrill Lynch sees a higher dollar as early as the first quarter of 2018. Now could be a good time to rotate from multinationals to companies that do almost all of their business in the United States. We screened the Merrill Lynch research database and found five companies rated Buy that fit the bill perfectly.
CBS
Shares of this large cap broadcaster have bounced nicely off the lows printed last month and still could be an incredible value. CBS Corp. (NYSE: CBS) may be in the best position of all the broadcast networks with an outstanding prime time lineup, solid sports franchises like the NFL, March Madness College Basketball, The Masters and other top programming, the venerable network could once again be an outstanding stock for shareholders.
The company is leading in the ratings and is poised to continue the network’s programming dominance in 2016. The broadcasting giant is now in the midst of a significant stock repurchase process, and many on Wall Street expect the company to shrink its share base by around 25% over the next two years.
CBS shareholders are paid a 1.26% dividend. The Merrill Lynch price target for the stock is $78, and the Wall Street consensus figure is $70.72. Shares closed trading Friday at $58.90.
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Dominion Resources
Many of the Wall Street firms that we cover are very positive on this top utility. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.
Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers on regulated natural gas distribution and storage.
Investors in Dominion Resources are paid a solid 3.63% dividend. Merrill Lynch has an $87 price target on the shares, while the consensus price target is at $81.86. The stock closed Friday at $84.91.
Home Depot
This 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.
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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.
The stock has rallied on the company’s strong fundamentals, as well as a highly consolidated industry position that separates it from other retail subsectors. Home Depot remains, clearly, the “best house on the retail block” with room for continued upside on strong traffic and share gains.
The horrific storms that hit Texas and Florida this summer are almost certain to drive third-quarter results higher. Given the work to repair could take some time, the potential could continue well into 2018 and beyond. The research report noted the company has the largest exposure to the most disaster prone states at 36% of store locations.
Shareholders receive a 1.96% dividend. The $215 Merrill Lynch price target is well above the consensus price objective of $188.80. The stock closed most recently at $182.58 a share.
Intuit
This company has been on a roll this year and hits all the metrics in the technology sector. Intuit Inc. (NASDAQ: INTU) is a provider of business and financial management solutions for small and medium-sized businesses, financial institutions, consumers and accounting professionals. Products and services include TurboTax, QuickBooks, Quicken, small business financial management and payroll processing, personal finance and tax preparation and filing and online banking services through its Digital Insight acquisition. Intuit also offers products on a software as a service (SaaS) platform across all its business divisions.
Intuit has served small businesses and accountants with QuickBooks for more than 20 years. The company was an early innovator in cloud accounting when it first launched QuickBooks Online in 2001. QuickBooks Online has more than a million paying subscribers, cementing its market leadership as small businesses shift to the cloud.
Intuit investors are paid a 0.98% dividend. Merrill Lynch has set its price target at $172. The consensus price objective is $157.53, and the stock closed on Friday at $159.65.
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Kohl’s
This top retailer traded sideways for almost all of 2017 and is a favorite specialty retailer for the holidays. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States that offer private label, exclusive and national brand apparel, footwear, accessories, beauty and home products to children, men and women customers. The company also sells its products online at Kohls.com and through mobile devices.
While retail chains have suffered from internet pressure, Kohl’s has held its own as consumers see the company as a solid discount retailer. In addition, Amazon is growing its partnership with the department store chain. Last summer, the two companies announced that Kohl’s would begin selling Amazon devices, such as the Echo and Fire tablets, at 10 of its stores. Kohl’s also will be accepting Amazon.com returns at certain U.S. locations.
Top Wall Street analysts think that the company is a share gainer as its initiatives to drive traffic appears to take hold and will benefit from peer store closings, new brand additions and omnichannel initiatives. Margins are on the upswing, driven by growth in regular priced sales, while cost savings and efforts to right size select boxes are also helping.
Investors receive a 4.35% dividend. The Merrill Lynch price target is $51. The posted consensus estimate is $43.61, and shares closed trading on Friday at $51.35.
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Five top companies doing the vast majority of their business right here in the United States. All these companies make good sense for growth accounts and are reasonably safe plays for those concerned with high market valuations.
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