The relentless volatility that has marked 2016 so far is doing something only a market sell-off can do. Many top blue chip companies that have performed well over the years, and have also paid in some cases outstanding dividends, are being sold off to the point where the current valuations put them more in a value arena. For investors with fresh capital, or those selling losers, this could be the best entry point in some time to buy shares.

In the weekly report from Jefferies that highlights its top value picks, we found four companies that all have taken hits during the recent bouts of selling and make good sense for investors to consider now. All are rated Buy at Jefferies.

AT&T

AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

While shares are trading at a very cheap 12.5 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors has not only driven traffic, but increased device financing plans.

The company announced recently it is working with Salesforce.com to connect Internet of Things data from AT&T’s solutions into Salesforce’s Customer Success Platform. By connecting AT&T M2X into Salesforce’s Service Cloud, companies can automatically create and route service requests, cases or tickets through prebuilt workflows.

While fourth-quarter earnings were in line with forecasts, and slightly below the Jefferies estimates, a change in accounting for the entertainment group lowered revenue/EBITDA by $300 million for the quarter. The analysts note that this knocked $0.03 off the bottom-line numbers. So all in all, a solid quarter, and another reason for conservative accounts to own the stock, especially with solid DirecTV adds and mid-single-digit earnings growth estimated for 2016.

AT&T investors receive a huge 5.23% dividend. The Jefferies price target for the stock is $40, and the Thomson/First Call consensus price target is $37.24. Shares closed Wednesday at $36.72.

Oracle

Shares of mega-cap software company Oracle Corp. (NYSE: ORCL) trades at 14.2 times estimated 2016 earnings, and it sports a solid free cash flow yield. Combined sales in Oracle’s cloud software, infrastructure and platform-as-a-service businesses were solid, and Jefferies feels that this business has room to grow.

Co-Chief Executive Officer Mark Hurd has made almost all of Oracle’s services available via the Internet, as the database-software company changes its business model to fit a new competitive landscape. Revenue generated from software license updates and support constituted 52% of Oracle’s total revenue of $9.0 billion in fiscal second quarter of 2016, which Jefferies viewed as in line with expectations.

The analysts also feel that as the company’s 12C database cycle starts to contribute during calendar 2016, the stock could very well be poised for what they term a breakout year. After recent investor meetings, the analysts raised fiscal year 2017 cloud margins to 66% from 63% and earnings per share to $2.80. They also believe that the software giant may be on the verge of a multiyear database product cycle.

Oracle investors receive a 1.7% dividend. Jefferies has a $50 price objective, and the consensus target is lower at $44. Shares closed Wednesday at $35.69.
VMware

This stock is down a stunning 47% since August. VMware Inc. (NYSE: VMW) provides virtualization infrastructure solutions in the United States and internationally, including a suite of products designed to deliver a software-defined data center (SDDC), run on industry-standard desktop computers and servers, and support a range of operating system and application environments, as well as networking and storage infrastructures. Its solutions enable organizations to aggregate multiple servers, storage infrastructure and networks together into shared pools of capacity.

Of course the big issue is how the stock will trade going forward as a result of the Dell deal with EMC, which was a concern even before the deal surfaced. The Jefferies analysts have said in the past that they feel VMware will continue to trade at a discount to intrinsic value because of the overhang. While they acknowledge the continuing headline risk, they also feel that business is surprisingly resilient and that the company continues to sign deals.

VMware posted solid fourth-quarter results, but the guidance going forward was disappointing. The analysts feel that the base value of the company, or the value of the future cash-flow from the maintenance stream, is $55, and that is way above where the stock now trades.

The monster $83 Jefferies price target is higher than the consensus target of $62.18. The stock closed Wednesday at $44.96.

Western Digital

This industry-leading developer and manufacturer of storage solutions that help to create, manage, experience and preserve digital content is a leader in the total addressable hard disk drive (HDD) market. Western Digital Corp. (NASDAQ: WDC) provides a full portfolio of high-quality storage products with effective technology deployment, high efficiency, flexibility and speed. Its products are marketed under the HGST and WD brands to original equipment makers, distributors, resellers, cloud infrastructure providers and consumers.

The most compelling news is that the company made a stunning $19 billion purchase of SanDisk last year. This could be a strong addition to the Western Digital current offerings, and it could significantly benefit from SanDisk’s technology and portfolio leadership in the NAND flash semiconductor and enterprise flash systems market.

The drop off in the PC business helps to spur initiative in the company’s cloud business, and analysts estimate that the company’s gross profit contribution from Business Critical (cloud) drives will exceed that of PCs by the second half of next year. Of all the stocks beaten down due to the poor PC environment, Western Digital may have the most upside potential, especially when Jefferies notes that in 2016 Enterprise HDDs will have an average three-year cost of $100 per year, versus $500 for NAND.

Investors receive a plump 4.16% dividend. While Jefferies has a whopping $82 price target, the consensus figure is lower at $73.75. Shares closed Wednesday at $48.04.

If there was ever a time to look for value in the markets it’s now. With some multiples stretched and volatility spiking, we could be in for a rough ride, and these stocks may have a far better chance of riding out the storm, especially with the technology bias and the prices being dirt cheap at current levels.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.