With the first quarter of 2018 over, and a rash of earnings reports ready to hit the tape, many of the top firms we cover here at 24/7 Wall St. are making some changes to their lists of top stocks to buy. With the markets continuing to experience rising volatility, it makes sense for the big banks and investors to review their ideas and the thesis behind them, and to make changes, which could include taking off both winners and losers.
A new Deutsche Bank report features some big changes to the firm’s Conviction List of top stock ideas. We screened the list by sector and found six new additions, one from each sector, to buy that make good sense for growth portfolios now.
Mondelez
This consumer sector giant is designed for conservative accounts. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.
Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.
Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.
Shareholders receive a 2.14% dividend. The Deutsche Bank price target for the stock is $51, while the consensus target is $51.35. The shares closed trading on Tuesday at $41.18.
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Starwood Property Trust
This top real estate company makes good sense for income investors now. Starwood Property Trust Inc. (NYSE: STWD) is an affiliate of global private investment firm Starwood Capital Group and is the largest commercial mortgage real estate investment trust (REIT) in the United States.
Its core business focuses on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt and equity investments. Through its subsidiaries LNR Property and Hatfield Philips International, Starwood Property Trust also operates as the largest commercial mortgage special servicer in the United States and one of the largest primary and special servicers in Europe.
Investors receive an outstanding 9.19% distribution. Deutsche Bank has a $24 price target, and the consensus target is $21.89. Shares closed Tuesday at $20.90.
Valeant Pharmaceuticals
This company has been fighting its way back now for over a year and may be a very solid contrarian play. Valeant Pharmaceuticals International Inc. (NYSE: VRX) operates as a multinational, specialty pharmaceutical and medical device company that develops, manufactures and markets a range of pharmaceuticals, over-the-counter (OTC) products and medical devices. The company operates through three segments.
The Bausch + Lomb/International segment provides pharmaceutical products, OTC products and medical device products, primarily consist of Bausch + Lomb products, with a focus on the vision care, surgical, consumer and ophthalmology prescription products in the United States; and pharmaceutical products, generic pharmaceutical products, OTC products, medical device products and Bausch + Lomb products in Canada, Europe, Asia, Australia and New Zealand, Latin America, Africa and the Middle East.
The Branded Rx segment sells gastrointestinal and dermatological products in the United States. The U.S. Diversified Products segment offers pharmaceutical products, OTC products and medical device products in the areas of neurology and certain other therapeutic classes, including aesthetics.
The $20 Deutsche Bank price target compares with the $16.75 consensus estimate. Shares closed most recently at $15.67.
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KBR
This old-school construction firm looks like a shoo-in for border wall contracts. KBR Inc. (NYSE: KBR) is a premier global engineering and construction company focusing on the energy sector and government services, with particularly strong resume in the liquefied natural gas (LNG) market, having built a third of the installed global capacity.
KBR operates through three segments. The Government Services segment offers life-cycle support solutions to defense, space, aviation, and other programs and missions for government agencies in the United States, the United Kingdom and Australia.
Technology & Consulting includes proprietary technology focused on the monetization of hydrocarbons (especially natural gas and natural gas liquids) in ethylene and petrochemicals; ammonia, nitric acid and fertilizers; oil refining; gasification; oil and gas consulting; integrity management; naval architecture and proprietary hulls; and downstream consulting
Engineering & Construction includes onshore oil and gas; LNG (liquefaction and regasification)/GTL; oil refining; petrochemicals; chemicals; fertilizers; differentiated EPC; maintenance services (Brown & Root Industrial Services); offshore oil and gas.
Shareholders receive a 1.97% dividend. Deutsche Bank has set its price objective at $19. The consensus price target is $19.38, and shares closed Tuesday at $16.24.
Parsley Energy
This is a smaller capitalization stock for aggressive investors to consider and a potential takeover candidate. Parsley Energy Inc. (NYSE: PE) is an oil and gas producer with 227,000 net acres in the Permian Basin. The majority of acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin.
The company had 222 million barrels of oil equivalent of proved reserves at the end of 2016, of which 61% was oil. Through strategic acquisitions and acreage swaps, it has grown its acreage position since its initial public offering and has over 7,900 horizontal locations across multiple prospective zones.
The company is a catalyst rich and is Permian Basin pure play. Parsley Energy has some of the strongest wells in the basin, generating returns that are among the best in the industry. It is also rapidly de-risking its drilling inventory and is well-positioned to continue to beat its strong growth projections.
The Deutsche Bank price target is $36. The consensus target is $37.55, and shares closed at $28.24.
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Microsoft
This top old-school technology stock has posted all-time highs this year and has a massive $138.6 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the recent earnings report, which was outstanding.
The company has been somewhat quieter on plans for its huge trove of overseas funds, but CEO Satya Nadella surely has big plans for any repatriated money, be it pay off debt, buy back shares, hire employees or spend on research and development.
Shareholders currently receive a 1.85% dividend. The Deutsche Bank price target of $120 compares with a consensus target of $104.55 and the most recent close at $89.71.
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Six new ideas on the Deutsche Bank Conviction List that are top stocks to buy for the next year. All make good sense for growth accounts looking to add new positions. Plus, all are at reasonable prices, so any big risk-off selling shouldn’t have a huge impact.
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