Investing

Jefferies Makes Huge Q4 Addition to Franchise Picks Stock List

Lee Jackson

Published: October 23, 2018 7:20 am

Last Updated: January 11, 2020 4:01 pm

All the companies that we follow here at 24/7 Wall St. keep a list for their top institutional and retail clients of high-conviction stock picks. These are generally the companies they not only like on a longer term basis, but those stocks that usually have big upside to the assigned target price. Many firms on Wall Street recently have tweaked their lists to account for potential changes in the fourth quarter and for 2019, and one company has added an outstanding stock we feel could have outsized upside.

In a recent research note, the analysts at Jefferies make a big move by adding a top health care company to the firm’s well respected Franchise Picks list of stocks to Buy. We cover this new addition, and we also screened the list for the highest dividend paying stocks in the group.

Shares of Teladoc Health Inc. (NASDAQ: TDOC) were added to the list and, given the strength in the sector, the stock may be a great buy now. This innovative health care company offers a telehealth platform, delivering on-demand health care anytime, anywhere, through mobile devices, the internet, video and phone.

The company’s solution connects its members with its more than 3,000 board-certified physicians and behavioral health professionals treating a range of conditions and cases from acute diagnoses, such as upper respiratory infection, urinary tract infection and sinusitis to dermatological conditions, anxiety and smoking cessation. Teladoc Health serves over 7,500 employers, health plans, health systems and other entities. And these clients collectively purchased access to its solution for more than 20 million members.

The Jefferies team said this about Teladoc in its report:

We add Teladoc to the Franchise Pick list. The analysis of web and app data suggests that the roll out across CVS’ app and website is on track to contribute 200-210k ‘paid’ visits for Teladoc in 2019. This would represent a 7-9% increase in total visits, and the figure is likely conservative. He finds shares particularly attractive given the recent pullback and increased visibility toward 25%+ revenue growth. Teladoc is well positioned to benefit from the evolution of healthcare delivery.

Jefferies has a $95 price target on the stock, while the Wall Street consensus target is $87.72. The shares closed on Monday at $69.14, up over 3% on the day.

Below are the four top dividend-paying stocks on the Franchise List.

Boeing

This stock has traded in a tight range all year and looks ready to break out. Boeing Co. (NYSE: BA) is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined.

The different segments in the company are: Commercial Airplanes; Boeing Defense, Space & Security and Boeing Capital, which provides financial solutions facilitating sale and delivery of Boeing commercial and military aircraft, satellites, and launch vehicles.

Boeing and Embraer signed a nonbinding memorandum of understanding to create a new strategic partnership for commercial aviation. The new joint venture is valued at $4.75 billion, which values Boeing’s 80% share at $3.8 billion.

Boeing shareholders are paid a 1.92% dividend. The Jefferies price objective for the shares is $410, and the consensus target price is $413.30. The stock closed Monday at $355.98 a share.

Chevron

This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some on Wall Street estimate that the company will have a compound annual growth rate of over 5% for the next five years.

Many on Wall Street feel that, with Permian production and asset disposals targets reset, the company can raise the dividend 20% and buyback 15% of shares. Many analysts view the strategy update as appropriately conservative for one of the more oil-levered majors. The Chevron strategy through 2020 is focused on discipline, enabled by step change in capital efficiency driven by doubling Permian production.

Jefferies feels that the company presents to investors the most advantaged portfolio in the sector. A strong growth profile is driven by high-margin projects tied to oil prices. Australian LNG and Tengiz are essentially no-decline assets and underpin financial performance. An industry-leading Permian Basin position provides short cycle investment opportunities to 2030 and beyond.

Chevron shareholders receive an outstanding 3.79% dividend. The $157 Jefferies price target is well above the consensus price target of $146.23. The shares closed most recently at $117.21.

KeyCorp

This top midcap bank makes good sense for the fourth quarter and 2019. KeyCorp (NYSE: KEY) operates as the bank holding company for KeyBank National Association, which provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses.

The company also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets banner.

The top managers are attracted to the larger regional banks, as valuations look very reasonable and cost-saving plans are helping to make forward estimates look very achievable. With overall credit remaining solid, earnings and loan deposit and fee growth all are positive metrics for the bank.

KeyCorp investors receive a 2.80% dividend. Jefferies has set its price target at $23. The consensus target is $22.68, and shares closed Monday at $17.25.

Williams Companies

This top energy company was added to the Jefferies Franchise Pick list of top stocks to buy in the summer. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that has a 74% ownership interest in its underlying master limited partnership, Williams Partners. Shareholders will vote on a complete merger on August 9, and soon after that, most believe the Williams Partners deal will close.

The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by LNG exports, power generation and industrial needs. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.

Shareholders receive a very sizable 5.10% dividend. The Jefferies price target is $34. The consensus target is $33.71, and the shares ended Monday at $26.28.

One new addition to the Franchise Picks list, and four large-cap growth stocks that all pay reliable dividends. Given the recent volatility and selling, all have backed up to much more reasonable entry points.