All the companies that we follow here at 24/7 Wall St. keep a list for their institutional and high net worth retail clients of high-conviction stock picks. Generally, analysts like these companies on a longer-term basis, and they usually have big upside to the assigned target prices. Since the beginning of the year, many Wall Street firms have tweaked their lists to account for potential changes in 2020, and one company has added some outstanding stocks we feel could have outsized upside.
A new Baird research report presents the firm’s top growth stock picks for 2020. The list of Best Ideas for 2020 features high-conviction recommendations from the Baird analysts, which has been recognized consistently for quality and trustworthiness for over 15 years.
We screened the growth stock picks looking for large-cap leaders that also pay a dividend, as total return could be one of the best ways to approach investing this year. We found five that make good sense in what remains a very expensive market.
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Broadcom
This stock has rallied smartly off last summer’s lows and could potentially break out to new highs this year. Broadcom Inc. (NASDAQ: AVGO | AVGO Price Prediction) 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.
Top Wall Street analysts like Broadcom’s leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many analysts see a cyclical rebound in industrial and communications demand.
Broadcom investors receive a very solid 4.16% dividend. Baird has a whopping $400 price target on the shares, and the Wall Street consensus price target is much lower at $349.76. The stock closed Wednesday’s trading at $308.74 per share.
L3Harris
This recently merged company is now the sixth-largest defense outfit, and it is on the Jefferies Franchise Picks list as well. L3Harris Technologies Inc. (NYSE: LHX) is an agile global aerospace and defense technology innovator that engages in the provision of defense and commercial technologies across air, land, sea, space and cyber domains.
The Integrated Mission Systems segment includes intelligence, surveillance and reconnaissance; advanced electro optical and infrared; and maritime power and navigation. The Space and Airborne Systems segment includes space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare.
The Communication Systems segment consists of tactical communications; broadband communications; L3’s night vision; and public safety. The Aviation Systems segment is composed of defense aviation products; security, detection and other commercial aviation products; air traffic management; and commercial and military pilot training.
Investors in L3Harris receive a 1.41% dividend. The Baird has a price target of $245, while the posted consensus target is lower at $245.24. The stock closed trading most recently at $211.29 a share.
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Northrop Grumman
This is another top defense play, and it was ranked as one of the top five defense contractors by sales last year. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide. It is also one of the companies profiting most from war.
The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.
The Information Systems segment offers advanced solutions for Department of Defense, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.
The Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.
Northrop Grumman pays shareholders a 1.43% dividend. The $400 Baird price objective compares with a $403.72 consensus target price. The shares closed trading at $370.30 on Wednesday.
VFC
This top consumer apparel stock could be poised for a big 2020. V.F. Corp. (NYSE: VFC) is a leading apparel wholesaler of lifestyle brands, including North Face, Vans, Wrangler, Lee, Timberland and Nautica. VFC distributes products globally via department stores, independent retailers, specialty chains and its own retail (full price, outlet and e-commerce).
Coalition segments include Outdoor and Action Sports (68% of fiscal 2018 revenue), Jeanswear (21% of revenue), and Workwear/Imagewear (9% of revenue). The company reported solid results this year and recently spun off its Kontoor Brands to pay down debt.
Shareholders receive a decent 1.94% dividend. Baird has set its price objective at $114. The consensus target price is $101.71, and the stock closed Wednesday at $97.05.
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Yum! Brands
Everybody has to eat, and this top company continues to expand its worldwide presence. Yum! Brands Inc. (NYSE: YUM), whose brands include KFC, Pizza Hut and Taco Bell, is one of the largest restaurant operators in the world with about 44,000 stores in more than 120 countries. A significant portion of operating profits is derived internationally, with a growing contribution from emerging markets, including a heavy presence in China.
Just this week the company announced it is acquiring Habit Restaurants for $375 million in cash, or $14 a share. Top analysts view the move as a modest positive for the company, but the relatively small acquisition size will limit the stock relevance. The deal represents another move in the restaurant asset land grab taking place as companies seek to build scale. See the best-selling chain restaurant foods of 2019.
Yum! Brands investors receive a tasty 1.65% dividend. The Baird target price for the shares is $120. That compares to the posted $112.74 consensus target and the most recent share price of $102.17.
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With outstanding metrics and good dividends, these quality stocks make good sense for long-term outlook growth portfolios for 2020 and beyond. With solid total return potential, and somewhat less potential for volatility, they all are outstanding portfolio additions.
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