UBS Makes Changes to Equity Focus List for April

By Lee Jackson Published Apr 2, 10:05AM EDT

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As we start into the second quarter of what has already been a very volatile year, many of the top Wall Street firms are making some changes in the lists of stock recommendations for clients. With the specter of interest rate increases looming, and a strong dollar pressuring multinationals, some investors have looked to smaller cap stocks that do business primarily in the United States.

In a new report, the UBS wealth management research team sticks with larger cap stocks on the Equity Focus list. They also made some changes to start the second quarter. Added to the list are drug wholesaler McKesson Corp. (NYSE: MCK), while Centene Corp. (NYSE: CNC) and retailer Macy’s Inc. (NYSE: M) were removed.

We also scanned the list, which is still biased to technology, for the top yielding tech stocks. Three stood out for yielding more than the 30-year U.S. Treasury bond: Cisco Systems Inc. (NASDAQ: CSCO), Microsoft Corp. (NASDAQ: MSFT) and Qualcomm Inc. (NASDAQ: QCOM).

Cisco Systems

This networking services and products provider is expected to get a significant chunk of the Verizon 100G build-out, and while it will be relatively small in the revenue big picture at Cisco, it is a big new business type win for the company. The stock remains the analysts’ top mega-cap idea on the theme of improving IT spending, IT and telco network integration projects and a positive global macro environment.

After posting terrific earnings last time out and raising the company’s dividend payout to shareholders, Cisco may be one of the most attractive stocks to buy now on a sheer valuation basis.

Cisco investors are paid a very solid 3.1% dividend. The UBS price target for the stock is $32, and the Thomson/First Call consensus price target is $30.21. The stock closed on Wednesday at $27.25 a share.

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Microsoft

This top technology pick may hold sizable upside potential in 2015. The software giant disappointed on earnings and was sold off pretty hard in the middle of January, and we have seen insiders recently start to acquire stock at current levels. After an outstanding year in 2014, this sell-off in the stock gives investors a much better entry point into the venerable Silicon Valley firm.

The company recently announced its new “Spartan” Web browser that will replace Internet Explorer in Windows 10. While the name may change, many are lauding the positive changes. With the potential to beat what is perceived by Wall Street as somewhat disappointing guidance, investors may want to buy shares now in front of this month’s earnings report.

Microsoft shareholders are paid a 2.9% dividend. The UBS price target is $49, and the consensus estimate is posted at $47.06. Shares closed Wednesday at $40.72.

Qualcomm

Despite reporting solid earnings numbers that beat estimates in January, Qualcomm got absolutely blasted for lowering its full-year earnings and revenue forecasts, as well as its sales outlook for its semiconductor business. Not what analysts were expecting.

The stock is a Wall Street favorite, and many are sticking to their guns, basically saying that trading at current levels, with the stock is at 13.81 times estimated 2015 earnings, it is a tremendous long-term value. Qualcomm is a quality tech company with recurring royalty revenue and a strong footprint, so patient investors may fare very well.

Investors are paid a 2.5% dividend. UBS has a $71 price target, and the consensus target is higher at $76.91. Shares closed Wednesday at $69.43.

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Some of these battered tech names may make good additions to a portfolio as they pay decent dividends, should continue to buy stock back and should turn around the underperforming company segments as the year plays out.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.