With the S&P 500 up almost 20% this year and the third-quarter earnings coming in pretty much as expected, it has been another solid year for stock investors. The question now is what is the best course to chart for what could be a very volatile 2020? In a year that will feature what should prove to be one of the most rough-and-tumble presidential elections in history, as well as the continued trade battle with China, it makes sense perhaps to take some profits and look for better opportunities.
We decided to screen our 24/7 Wall St. research database for blue chip large-cap stocks that have taken a beating this year. We found four that most investors are very familiar with that have dealt with a variety of headline or sector issues that have had a major effect on the stock prices. All are rated Buy at major Wall Street firms, and all offer patient investors the potential for some big upside.
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Altria
This maker of tobacco products offers value investors a great entry point now, and it took a hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO | MO Price Prediction) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro, one of the most valuable brands in the world.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs. The company also has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
The negative press on vaping has been a big headwind, and the crash in marijuana stock prices have weighed on this worldwide leader. Investors are still able to get the best entry-level pricing since early 2019.
In addition, the company raised its dividend in late August for the stunning 54th time in the past 50 years.
Altria shareholders now receive a massive 7.25% dividend. Merrill Lynch has a $54 price target on the shares, while the Wall Street consensus target is $52.92. The stock was last seen trading on Tuesday at $46.34 a share.
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Boeing
This company has had a public relations nightmare due to the 737 Max issues. Boeing Co. (NYSE: BA) is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. It is also one of the most valuable brands in the world.
The different segments in the company are Commercial Airplanes, Boeing Defense, Space & Security and Boeing Capital. The latter provides financial solutions facilitating sale and delivery of Boeing commercial and military aircraft, satellites and launch vehicles.
Last year, 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.
While the 737 Max troubles are far from over, the tide is finally turning for the company, and the firm was basically upbeat at the recent Paris Air Show. The 737 Max software update is complete and the company is working on training and education materials and certification processes now. Once it returns to flight, deliveries may be higher than the production rate, and long-term expectations on production have not changed.
Boeing shareholders receive a 2.44% dividend. The Jefferies price objective is a whopping $430 and the posted consensus target is $395.86 a share. The stock closed trading at $337 on Tuesday.
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Exxon
This remains a top Wall Street energy pick and is a safer long-term play for conservative investors. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products. Note that Exxon has one of the highest paid American CEOs.
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Despite the fact that oil has started above the critical $50 level, the energy sector has been a big disappointment this year. While the S&P 500 is up almost 20% this year, the energy sector, as measured by the Energy Select SPDR ETF (NYSE: XLE), is essentially flat. This comes despite the fact the sector has seen some price premium moved in as Saudi Arabia had production capabilities bombed and Iran recently had a tanker attacked.
The company raised the dividend earlier this year by a nickel per share to $0.87 per share. That now translates to a solid 5.04% dividend. The $100 Merrill Lynch price objective compares with the much lower consensus target price of $79.14. The stock closed most recently at $69.09 per share.
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McKesson
This is one of the four companies negotiating a huge opioid settlement. McKesson Corp. (NYSE: MCK) is the largest drug distributor in the United States, and it has sizable businesses in Canada and Europe, including distribution and retail pharmacy assets.
The company is also the largest medical-surgical distributor to the non-acute care market and offers various supply chain services and technology, although it recently divested its clinical health IT platform.
McKesson was one of the companies that settled a bellwether civil lawsuit with two Ohio counties, just hours before they were to go on trial. The $260 million deal set the basis for a broader potential multi-billion-dollar payout to some 2,700 addiction-ravaged communities nationwide that had signed on to the Cleveland lawsuit, the first in a federal court to address the causes of the crisis.
McKesson offers investors just a 0.98% dividend. Merrill Lynch’s Buy rating comes with a $160 price target. The posted consensus target was last seen at $154.94, and the shares closed most recently at $146.92 apiece.
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As is the case with most headline-driven stock stories, once the headlines go away, the stocks eventually recover and continue on their long-term corporate path. There are countless examples over the years of top blue chips like these responding and overcoming negative press, and it’s a good bet these four will as well.
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