After the first down quarter since 2020, many across Wall Street are examining the winners and losers for the quarter and shuffling the deck, looking for stocks that have the best upside potential for the second quarter and beyond. Conventional wisdom would lead many to stay with the stocks that were the winners in the quarter, but some solid work by the top analysts at Jefferies suggests that just the opposite may be the best plan for the next three months and beyond in 2022.
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In a new research report, Jefferies makes the case that history actually shows that placing bets on sector laggards has paid off handsomely for investors when examining stocks that underperformed their respective sectors on a trailing-12-month basis. The report noted this:

Though the S&P 500 is roughly 10% higher after its 13% drop to start the year, the party has had a fairly exclusive guest list. Just 4 of 11 sectors and ~34% of the index constituents have bested the market since the 3/8 low. And while the narrow rally may continue in the intermediate term, the strong divergence is opening the door to some outsized opportunities.

We analyzed Jefferies coverage for stocks that have underperformed their respective GICS sector by more than 15% on a trailing-12-month basis. Additionally, qualifying names needed to be Buy-rated by Jefferies’ analysts and fall short of being consensus Buys using standardized, aggregated ratings. This resulted in a diverse mix of 58 stocks, cross-cutting a wide array of sectors and market caps.

We screened the 58 stocks looking for the companies that paid the highest dividends, as this could be a year in which total return is the name of the game. Eight stocks stood out, and while all are Buy rated at Jefferies, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Amgen

This biotech giant remains a safer way to play the massive potential growth in biosimilars. Amgen Inc. (NASDAQ: AMGN) discovers, develops, manufactures and delivers human therapeutics worldwide. It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience.

The company’s products include the following:

• Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
• Neulasta reduces the chance of infection due a low white blood cell count in patients with cancer
• Prolia to treat postmenopausal women with osteoporosis
• Xgeva for skeletal-related events prevention
• Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
• Aranesp to treat a lower-than-normal number of red blood cells and anemia
• Kyprolis to treat patients with relapsed or refractory multiple myeloma
• Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization

Shareholders receive a 3.17% dividend. Jefferies has a $280 target price on Amgen stock. The consensus target is just $246.33, and the final trade for Monday came in at $244.87.

The need for the electronics and gear to set up a “work from home” office could be an ongoing huge tailwind for this leading retailer. Best Buy Inc. (NYSE: BBY) is the top specialty retailer of consumer electronics. As of January 30, 2022, it had 1,144 stores.
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Those stores provide computing products, such as desktops, notebooks and peripherals; mobile phones comprising related mobile network carrier commissions; networking products; tablets covering e-readers; smartwatches; and consumer electronics consisting of digital imaging, health and fitness, home theater, portable audio comprising headphones and portable speakers, and smart home products.

Its stores also offer appliances, such as dishwashers, laundry, ovens, refrigerators, blenders, coffee makers and vacuums; entertainment products consisting of drones, peripherals, movies, music and toys, as well as gaming hardware and software, and virtual reality and other software products; and other products, such as baby, food and beverage, luggage, outdoor living and sporting goods.

In addition, Best Buy provides consultation, delivery, design, health-related, installation, memberships, repair, set-up, technical support and warranty-related services. The company offers its products through stores and websites under the Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, CST, Current Health, Geek Squad, Lively, Magnolia, Best Buy Mobile, Pacific Kitchen, Home, and Yardbird banners.

Best Buy stock investors receive a 3.89% dividend. The Jefferies target price of $140 is well above the $120.98 consensus target. The shares closed over 4% higher on Monday at $94.34.

Conagra Brands

This is a solid stock for conservative investors looking for growth and income. Conagra Brands Inc. (NYSE: CAG) operates as a food company in North America. Its brands include Marie Callender’s, Reddi-wip, Hunt’s, Healthy Choice, Slim Jim, Orville Redenbacher’s, Alexia, Frontera, Banquet and Chef Boyardee.

The company’s Grocery & Snacks segment primarily offers shelf-stable food products in various retail channels in the United States. The Refrigerated & Frozen segment provides temperature-controlled food products in various retail channels in the United States. The International reporting segment offers food products in various temperature states in retail and foodservice channels outside of the United States.

The Foodservice segment offers food products, including meals, entrees, sauces and various custom-manufactured culinary products packaged for sale, to restaurants and other foodservice establishments in the United States.

Investors receive a 3.67% dividend. Jefferies has set a $40 price objective. The consensus target for Conagra Brands stock is $36.41, and Monday’s closing share price was $34.12.

Shares of this athletic shoe retailer have rallied from lows and look ready to move higher. Foot Locker Inc. (NYSE: FL) engages in the retail of athletic footwear, apparel, accessories, equipment and team licensed merchandise under the Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports and other brand names.
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As of January 29, 2022, it operated 2,858 retail stores in 28 countries, including the United States, Canada, Australia and New Zealand, as well as 142 franchised Foot Locker stores located in the Middle East and Asia. The company also offers its products through various e-commerce sites and mobile apps.

Holders of Foot Locker stock enjoy a 5.44% dividend. The stunning $61 Jefferies price compares with a consensus target of $34.80 and Monday’s final share price of $29.87.

Gilead Sciences

This is another beaten-down biotech that is trading a very reasonable 9.05 times estimated 2022 earnings and has big-time upside potential. Gilead Sciences Inc. (NASDAQ: GILD) is a research-based biopharmaceutical company that discovers, develops and commercializes medicines in the areas of unmet medical need in the United States, Europe and elsewhere.

Gilead provides Biktarvy, Genvoya, Descovy, Odefsey, Truvada, Complera/Eviplera, Stribild and Atripla products for the treatment of human immunodeficiency virus (HIV) infection; Veklury, an injection for intravenous use, for the treatment of coronavirus disease 2019; and Epclusa, Harvoni, Vosevi, Vemlidy and Viread for the treatment of liver diseases. It also offers Yescarta, Tecartus, Trodelvy and Zydelig products for the treatment of hematology, oncology and cell therapy patients.

In addition, Gilead provides Letairis, an oral formulation for the treatment of pulmonary arterial hypertension; Ranexa, an oral formulation for the treatment of chronic angina; and AmBisome, a liposomal formulation for the treatment of serious invasive fungal infections.

Investors receive a 4.89% dividend every quarter. The Gilead Sciences stock price target at Jefferies is $80. The consensus target is $71.48, and Monday’s closing print was $60.67.

IBM

This blue-chip tech giant is still offering investors a very solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions.

The company integrates its hardware products with its software and services offerings in order to provide high-value solutions. Analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.

The company posted a very solid fourth quarter. The cloud proved to be big in the earnings reports, as did Red Hat, the software giant the firm bought in 2019. Red Hat’s open hybrid cloud technologies are now paired with the unmatched scale and depth of IBM’s innovation and industry expertise and sales leadership in more than 175 countries.

The dividend yield is 5.04%. The Jefferies price target of $165 is well above the $143.47 consensus target. IBM stock closed at $130.27 a share on Monday.

This consumer staples leader is a safe bet for nervous investors. Kimberly-Clark Corp. (NYSE: KMB) manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments.
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The Personal Care segment offers disposable diapers, swimpants, training and youth pants, baby wipes, feminine and incontinence care products, and other related products under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise and other brand names.

The Consumer Tissue segment provides facial and bathroom tissues, paper towels, napkins and related products under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve and other brand names. The K-C Professional segment offers wipes, tissues, towels, apparel, soaps and sanitizers under the Kleenex, Scott, WypAll, Kimtech and KleenGuard brands.

The company sells household use products directly to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores and other retail outlets, as well as through other distributors and e-commerce. It provides away-from-home use products directly to manufacturing, lodging, office building, food service and public facilities, as well as through distributors and e-commerce.

Shareholders receive a 3.71% dividend. Jefferies analysts have a $156 target price, and the consensus target for Kimberly-Clark stock is $129.69. The final trade for Monday was reported at $125.02 per share.

Texas Instruments

This old-school legacy semiconductor tech company offers solid value at current levels and is a great pick for more conservative investors. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components, to digital light-processing technology and calculators.

Some 65% of the company’s sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets. While business from those sectors, especially automotive, could suffer in the near term, the analyst feels the solid dividend should support the shares. The company is also a big Apple supplier, so the long-term outlook for this venerable leader makes it a safer bet for investors with less risk tolerance.

Investors receive a 2.53% dividend. The Jefferies price target is $220, while the consensus target is $197.79. Texas Instruments stock was last seen on Monday trading at $182.71 a share.

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Eight top companies that cut across multiple sectors and offer investors the potential for a strong upside move that is supported by dependable, and in some cases, very large dividend payouts. This also provides different companies with varying degrees of risk tolerance from very conservative consumer staples to technology and biotech leaders.

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