Regardless of who wins the presidential election, most of us are just ready for the political circus to be over. However, there are potential storm clouds forming, and a dispute or delay in the election results could raise tensions and volatility. With the volatility index (VIX) trading over the 40 level briefly last week, it is a sure sign that some investors are getting worried. The VIX closed Monday at 37.13, despite a big rally.
Given the sharp increase in volatility, and the lackluster response to what was some spectacular earnings, especially from some of the technology giants, we decided to screen the Goldman Sachs research universe looking for some safer companies that make sense for investors now. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Charter Communications
This top cable giant has been expanding its services and product offerings. Charter Communications Inc. (NASDAQ: CHTR | CHTR Price Prediction) is a leading broadband communications company and the second-largest cable operator in the United States. It provides a full range of advanced broadband services, including Spectrum TV video entertainment programming, Spectrum Internet access and Spectrum Voice.
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Spectrum Business similarly provides scalable, tailored and cost-effective broadband communications solutions to business organizations, such as business-to-business internet access, data networking, business telephone, video and music entertainment services and wireless backhaul.
The company made a huge investment in Time Warner Cable and has completed the giant integration, which will enable all its product offerings, pricing, packaging and service operations to be universal across its footprint.
After the solid results were posted, the analysts had this to say:
We believe that Charter’s 3Q20 results reflect strong performance around the 3 key drivers of our Buy thesis, which are: 1) strong growth in broadband, 2) high operating leverage resulting in EBITDA growth and margin expansion, and 3) material buybacks that amplify free-cash-flow/share growth. With the shares having pulled back 12% from an all-time high on October 12th (vs. -6% for the S&P 500), we expect a positive reaction in the stock to the company’s third quarter results.
Goldman Sachs has a $710 price objective on the shares, and the Wall Street consensus target price is $670.43. Charter Communications stock traded at $594.45 Tuesday morning.
Colgate-Palmolive
This top dividend payer is a very safe play for investors. Colgate-Palmolive Co. (NYSE: CL) continues to deliver solid execution and is one of the best-positioned companies in its sector, given its strong brands in attractive categories, particularly oral care. Colgate is one of the most valuable brands in the world.
Over half of Colgate’s total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across Brazil, Russia, India and China. While those have slowed over the last year, a pickup in growth could be coming, especially with a very weak dollar making products attractive overseas.
The analysts said this about the results:
Colgate-Palmolive Reported strong third quarter results with balanced organic sales growth across all segments. Its Hills’ segment once again led the way (despite an onerous comparison) while Emerging Markets inflected to high-single digits to lift overall corporate growth to 7.5%. We believe growth was somewhat flattered by a bounce from the second quarter weakness, but the company’s growing traction with premium innovation, improved market share trajectory and better competitive positioning in emerging markets in the current environment should all have lasting benefits, in our opinion.
Colgate-Palmolive stock investors receive a 2.20% dividend. Goldman Sachs raised its price target from $86 to $90, and the consensus target is $81.45. The shares were trading at $81.90.
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Schlumberger
This top oil services company is expected to benefit from increased global exploration and production spending, and it is the ultimate contrarian pick now. Schlumberger Ltd. (NYSE: SLB) is the world’s largest provider of services and equipment used in drilling, evaluation, completion, production and maintenance of oil and natural gas wells.
The company operates in the oilfield service markets through three groups: Reservoir Characterization, Drilling and Production. Reservoir Characterization Group consists of the principal technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services and Schlumberger Information Solutions.
The Goldman Sachs analysts recently met with the CEO and said this regarding the venerable oilfield services giant’s future:
Depending on the pace of the oil price recovery and the reset of global demand, margins could certainly top 20% by the end of 2021 given cost-cutting and higher incremental margins. The company noted that the demand inflection could be as early as the end of winter versus the second half of 2021 and that they are already seeing a demand recovery in Asia and India today. The company noted the resumption of international activity in summer is a conservative assumption.
Shareholders receive a 3.21% dividend. The $30 Goldman Sachs price objective compares to the consensus price target of $27. Schlumberger stock was trading at $16.00 a share.
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Starbucks
Shares of this retail giant have traded down some recently and are offering a very solid entry point. Starbucks Corp. (NASDAQ: SBUX) operates as a roaster, marketer and retailer of specialty coffee worldwide. Its stores offer coffee and tea beverages, packaged roasted whole bean and ground coffees, single-serve and ready-to-drink coffee and tea products, juices and bottled water.
The company also licenses its trademarks through licensed stores, and grocery and national foodservice accounts. The company offers its products under the Starbucks, Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks VIA, Seattle’s Best Coffee, Frappuccino, Starbucks Doubleshot, Starbucks Refreshers and Starbucks Discoveries Iced Café Favorites brand names.
In the wake of the solid results, Goldman Sachs noted this:
While Starbucks has some margin levers to pull around the edges – in the event that sales trends reverse – the company is committed to the strategic investment plans it laid out to continue to invest in the business for the longer term. Therefore, we see potential that margins lag (and flow-through slows) if sales trends decelerate meaningfully. Learnings throughout the pandemic should enable better cost control in the business if the sales recovery reverses more than we observed earlier in the pandemic.
Shareholders receive a 2.03% dividend. The Goldman Sachs price objective is $97. The consensus price target is $89.19, and Starbucks stock traded at $87.70 on Tuesday.
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Plain and simple, we could be in for some rocky trading days, especially if the final election results are delayed. So it makes sense to move to some stocks that are not momentum darlings. These are good ideas for growth stock investors looking to stay in the market but dial down risk levels.
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