All the Wall Street firms that we follow here at 24/7 Wall St. keep a list for their institutional and retail clients of high-conviction stock picks. These are generally the companies they not only like on a longer term basis, but stocks that usually have big upside to the assigned target price.
Since the beginning of the year, many Wall Street firms have tweaked their lists to account for potential changes in 2018. With trade tariffs a major issue now and earnings ready to come fast and furious, the time is right to own the best stocks out there.
The analysts at RBC recently reviewed the second-quarter performance of their 30 top global ideas for 2018. We screened the list for the firm’s Top Picks that trade in the United States, and five make the cut. All are good ideas to own for the balance of 2018.
Broadcom
This stock has been on fire over the past year and remains a top pick across Wall Street. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Yesterday, Broadcom and CA issued a joint press release confirming an acquisition. Shares are traded down almost 10% in the premarket Thursday morning, after falling 3% yesterday as investors question the logic of buying a software company. The company has a proven track record of acquiring out-of-favor market leaders with high-cost structures and then improving the margins. Should the deal be accretive as expected, Broadcom remains incredibly cheap.
Broadcom investors receive a 2.8% dividend. The RBC price target for the shares is $330, and the Wall Street consensus target is $312.81. Shares closed Wednesday at $243.44 but were at $221 in Thursday’s premarket.
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Dollar Tree
This bargain retailer was hit hard back in February and could be offering a very compelling entry point. Dollar Tree Inc. (NASDAQ: DLTR) is one of the largest dollar store chains in the United States, with nearly $21 billion in revenues in 2017.
The company operates 14,482 stores in 48 U.S. states and five provinces in Canada under the Dollar Tree, Family Dollar and Dollar Tree Canada banners and stores carry an assortment of consumables, general merchandise and seasonal products.
Given the spike in purchasing from lower income consumers, this could be a huge positive Dollar Tree given the company’s big presence in the discount market.
RBC has a $97 price target, and the consensus target is $110.13. The shares closed Wednesday at $85.820.
DowDupont
This blockbuster merger from last year has emerged bigger and stronger. DowDupont Inc. (NYSE: DWDP) is a diversified chemical company with $79 billion in sales in 2017 and was formed as a result of the merger of Dow and DuPont in 2017.
The company is organized in three principal divisions of Agriculture (20% of EBITDA), Material Science (55%) and Specialty Products (25%), and it intends to separate into these three public entities by 2020.
The stock has underperformed this year, and the concerns over the trade issues with China are continuing to keep shares under pressure. The stock is down over 15% from highs that were printed in January.
Shareholders receive a 2.29% dividend. The $85 RBC price objective compares with the $81.72 consensus price target. The stock closed Wednesday at $66.30.
ServiceNow
This red-hot momentum stock has had an outstanding year. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
RBC has set its price objective at $180. The consensus target is $171.74, and the stock closed Wednesday at $187.18, so the RBC target could be going higher soon.
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Disney
This top consumer media company with multiple streams of income to push revenue and is bidding for the top Fox media assets. Walt Disney Co. (NYSE: DIS) stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming.
The Disney Media Networks segment operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels and ABC Family, as well as UTV/Bindass and Hungama. This segment also owns eight domestic television stations.
Disney shareholders receive a 1.58% dividend. The RBC price target is $130. The consensus target is $116.63, and shares closed Wednesday at $108.04.
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Five of the top global picks at RBC all look poised for a solid second half of 2018. These stocks make sense for growth portfolios that have a degree of risk tolerance.
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