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3 Stocks Set to Outperform in 2H19

Stocks are putting up impressive numbers so far this year. The S&P 500 is up 15%, and the tech-heavy NASDAQ is up 17.9%, and patient investors are reaping the rewards. But as this past May has shown, the markets are still volatile, and it’s tempting to look for ‘safe play’ investment. According to five-star blogger Aaron Levitt (Track Record & Ratings), the right stocks to buy are “the kind of equities that could be immune to the various geopolitical and economic events that are plaguing the markets currently.” So let’s dive into the TipRanks database and look at three stocks that are primed to keep delivering in the second half.

Comcast Corporation (CMCSA)

You wouldn’t necessarily pick the cable company as a market outperformer. Comcast has managed just that, however, gaining 20% year-to-date. The secret lies in streaming – by its Hulu agreement with Disney (DIS), Comcast is staking out a position in the future of television.

The Hulu agreement gives Disney operating control of Hulu now – it already has a controlling stake in the company – while committing both parties to a minimum sale price for Comcast’s shares in 2024. The advantage for Comcast is two-fold: the company can focus on releasing its own streaming service next year, while continuing to enjoy the profits from Hulu. And should Disney work its usual magic and boost Hulu’s valuation, Comcast will sell its share based on the higher valuation.

The near-term forward advantages which Comcast has locked in through the Hulu agreement are only part of the story. Comcast has shown double-digit annual EPS growth 15 times in the last 17 years, and generated $14 billion in free cash over in the last 12 months. Its cable and internet businesses provide a solid foundation to support the content production and technical innovation that the company needs to bring in new customers. The company’s upbeat forward-going prospects are reflected in the EPS estimates over the next three years – continued double digit growth. Add to this company’s attractive valuation and modest-but-reliable dividend, and you’ll understand why the market’s top analysts are so bullish.

From Morgan Stanley, Benjamin Swinburne (Track Record & Ratings) looks at the details of the Hulu agreement. Acknowledging that Disney has the immediate advantage, he also points out the benefits for Comcast: “The new deal gives it downside protection and content flexibility as it builds out its own streaming plans.” At the end of May, five-star analyst Mike McCormack (Track Record & Ratings), of Guggenheim, upgraded his rating on CMCSA and summed up the company’s position in the simple statement that “[Comcast] is well positioned within a rapidly changing landscape.” McCormack set a price target for the stock at $52, indicating his confidence in a 25% upside.

Comcast’s analyst consensus, based on all of its reviews over the last three months, is a ‘Moderate Buy.’ This consensus includes 7 buys and 3 holds. The stock is selling for $41, and the average price target of $48 suggests an upside potential of 17%.

View CMCSA Price Target & Analyst Ratings Detail

Waste Management, Inc. (WM)

There’s not much out there more pedestrian than picking up the trash, but Waste Management manages to turn our messes into investor profits. Trash collection and disposal is big business, and with North America’s largest network of landfill sites, recycling plants, and collection trucks, Waste Management sets the standard for its competitors. WM’s trucks even operate on compressed natural gas, to reduce emissions, giving the company a reputation to match its green livery.

Even better, for investors, is WM’s 28% year-to-date gain, well above the market average. WM shares got an immediate boost last week when two four-star analysts boosted their ratings of the stock. Writing for RBC Capital, Derek Spronck (Track Record & Ratings) pointed out WM’s “unique positioning within its sector.” Going into detail, he added, “We see Waste Management delivering out-sized earnings growth, driven by sustained organic growth rates and further enhanced by the announced acquisition of Advanced Disposal.” Appropriate to his upbeat outlook, Spronck upgraded his rating to ‘Outperform’ and gave WM a price target of $125, suggesting a potential upside of 9.8%.

At the same time, Michael Hoffman (Track Record & Ratings) of Stifel also took another look at Waste Management, and bumped his price target up to $120. Hoffman, who made up upgrade after attending the company’s investor day, said, “The company and its senior leadership team are focused on … free cash flow growth with high quality incremental returns on capital.” He clearly sees management pursuing a successful path forward, as his price target for the stock indicates a 5.4% upside.

Competent management pursuing cash flow and capital returns are not the only boon here for investors. Waste Management has a long history of steadily increasing its dividend payout. While the yield is modest – it currently stands at 1.72% annualized – each share earns over 50 cents per quarter. And WM has kept that payout reliable for nearly two decades.

Waste Management gets a unanimous verdict from the analyst consensus – a ‘Strong Buy’ rating, based on 6 buys set in the last three months. The company’s shares currently sell for $113, so the $120 average price target gives an upside over 5%.

View WM Price Target & Analyst Ratings Detail

Microsoft Corporation (MSFT)

And here’s the mature giant of the tech world, simply doing everything right. Microsoft has gained 32% year-to-date, head and shoulders above the S&P 500 and the NASDAQ indexes, and it has done so quietly, without generating the type of buzz that surrounds the FANG stocks. However quiet it may be, though, the success is unmistakable. On June 7, Microsoft became the third publicly traded company break above $1 trillion in market cap.

The immediate driver of the company’s growth is the wild success of its Azure cloud computing service. Arriving several years after Amazon Web Services, Azure has enjoyed faster growth rates, a fact noted by Phillip Winslow (Track Record & Ratings) of Wells Fargo, who added, “The full multi-year impact of Azure’s growth potential is still not properly reflected in consensus estimates for Microsoft.” Winslow’s estimate includes a price target of $145, indicating a possible 9.35% upside to the stock.

That his estimate may be low is suggested by Bernstein’s Mark Moerdler (Track Record & Ratings), who puts a number to Azure’s potential: “Microsoft could generate more than $140 billion in cloud-computing sales over the long term.” Moerdler sees MSFT shares hitting $152, an upside of 14.6%.

While the successful shift to the cloud and SaaS is powering the company’s current profits and returns, Microsoft is not placing all of its eggs in that basket. The company has made recent public demonstrations of its xCloud game streaming service, and the demos have highlighted several clear advantages in the field: a proprietary library of several thousand game titles; a ready audience in existing xBox customers; a network of data centers already supporting Azure and available to support game streaming. As Phil Spencer, Microsoft’s head of Project xCloud said, on how streaming is the future of gaming, “There are 2 billion people who play video games on the planet today. We’re not going to sell 2 billion consoles. It’s really about reaching a customer wherever they are, on the devices that they have.”

Oppenheimer’s five-star analyst Timothy Horan (Track Record & Ratings) sees all of this – the success of Azure and the upcoming xCloud release – as linked. He says, “The company has totally restructured itself around the intelligent edge cloud. Microsoft sees Azure as a base layer that customers use to run their applications on top of but also as a building block for its services up the software stack through dozens of new PaaS and SaaS offerings.” Like Winslow (quoted above), Horan gives MSFT a price target of $145.

Microsoft holds a ‘Strong Buy’ from the analyst consensus, based on no less than 23 buy ratings given in the last three months. The stock’s average price target of $142 gives a 7.7% upside to the current share price of $132.

View MSFT Price Target & Analyst Ratings Detail

Find more fresh investing ideas in TipRanks’ Trending Stocks tool. These are the stocks that are attracting Wall Street’s top analysts; visit today, and find out why!

Michael Marcus
Michael has been writing online content for nearly 15 years. Starting out in the SEO field, Michael has shifted in recent years to the financial sector, using his academic background in political science to draw connections between current events and the financial markets.

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