Game on. Mizuho Securities has challenged each of its analysts to select the stock that he/she believes would most likely provide long-term value for clients. The stocks selected range from Biogen (BIIB), a $65bn Biotech company, to Trinity Industries (TRN) a $3bn Industrial company.
Here we use TipRanks data to dig deeper into five of the stocks highlighted by Mizuho’s report. As you will see, all five of these stocks also score a ‘Strong Buy’ rating from the Street. That, combined with attractive valuations, make these five stocks top names to watch in 2019. Let’s take a closer look now:
Broadcom (AVGO – Research Report)
Chip stock Broadcom is down 7% since the start of 2019- and 13% on a one-year basis.
Apple (AAPL) suppliers like Broadcom suffered a blow after Apple slashed sales guidance for the first quarter. However, even in the face of this setback, AVGO remains a ‘Strong Buy’ stock.
Tellingly, the semiconductor maker is expected to report adjusted earnings per share of $23.04 for fiscal 2019 — up from estimates of about $21.50 in October. In contrast other Apple suppliers dropped their estimates in recent months.
“Trading at the low-end of historical valuations, we believe AVGO is undervalued as it is well-positioned with a diversified revenue stream” commented Mizuho’s Vijay Rakesh (Track Record & Ratings).
The five-star analyst continued: “We believe the acquisition of CA, while a surprise to investors, provides further shelter from Apple fears and China slowdown while driving earnings, margins, and FCF leverage.” He has a $295 price target on AVGO (25% upside potential).
Similarly, Merrill Lynch’s Vivek Arya argues that any Apple-related weakness “could be a particularly attractive buying opportunity.”
Also in the stock’s favor: a ~3%+ dividend yield and a remaining ~$6B in buybacks.
Fibrogen (FGEN – Research Report)
Biotech Fibrogen creates first-in-class medicines to treat chronic and life-threatening conditions. This includes illnesses such as anemia, idiopathic pulmonary fibrosis, and pancreatic cancer.
Five-star Mizuho Securities analyst Difei Yang (Track Record & Ratings) believes multiple upcoming catalysts could drive FGEN shares higher in the near to mid-term.
Most crucially, keep your eye for the major adverse cardiovascular events (MACE) analysis coming in 1H19. This could be a significant catalyst for shares. “With a precedent of positive efficacy/safety data, the upcoming readouts and MACE analysis are de-risked in our view but nonetheless remain important for regulatory approvals in the US and Europe” writes Yang.
She sees the stock soaring 53% to $74. All analysts covering the stock rate FGEN a ‘buy.’
Facebook (FB – Research Report)
Despite all its troubles, social media giant Facebook is still winning over analysts. The company is currently grappling with issues related to privacy, regulation, and operations monetization.
Nonetheless, top-performing Mizuho analyst James Lee (Track Record & Ratings) is sticking with FB as his No.1 stock. He believes shares are capable of surging 54% from current levels.
Lee reiterates FB as the top pick for three key reasons:
- The transition to Stories remains on track for success based on increased demand and pricing leverage for IG stories;
- Recent price weakness is overstated. Lee does not expect advertisers to meaningfully alter their ad budgets on FB because of the platform’s scale and efficiency; and
- Valuation is very compelling at 7x 2020 EBITDA, a steep discount to the estimated 20% growth rate and below Google’s multiple.
“We expect products yet to fully monetize to deliver a 60% upside over our estimated 2020 ARPU, the highest in our coverage universe” Lee tells investors.
In total, 33 out of 40 analysts rate the stock a buy, with 5 hold and 2 sell ratings. That’s with RBC Capital’s Mark Mahaney also picking FB as his Top Large Cap Long for 2019.
The RBC analyst reminds us that this is the “owner of the world’s 4 largest Social Media & Messaging assets, with one of the top ROI advertising platforms on the Net and a dominant market share (90%+) among Social Media platforms.”
Lennar Corp (LEN – Research Report)
Blue chip homebuilder Lennar has a rough 2018. Even with a 10% rally so far year-to-date, shares are still trading down 36% on a one-year basis.
That creates a buying opportunity according to Mizuho Securities’ Haendel Juste (Track Record & Ratings). His $60 price target indicates upside potential of 40%.
“We maintain our Buy rating on LEN and see a favorable entry point with the down >30% YTD and now trading at valuation levels not seen in years” Juste explains.
At current levels, the analyst believes concerns over affordability and slowing growth are more than priced in. “Looking into 2019, we think the market will reward names that can support higher top line revenue/order growth and EPS growth, leading margins, and with superior liquidity… Our analysis concludes LEN is well-positioned among peers on of these fronts.”
He isn’t alone. In total 10 out of 11 analysts are bullish on LEN right now. Out of these 11, all 3 top-performing analysts rate the stock a ‘buy.’
Occidental Petroleum (OXY – Research Report)
OXY is one of the largest US petroleum and natural gas exploration and production (E&P) companies. This Texas-based stock boasts over 2.5 million net acres in the lucrative Permian Basin in West Texas and southeast New Mexico.
It’s also the top pick of Mizuho analyst Paul Sankey (Track Record & Ratings). He has a $96 price target on the stock for 48% upside potential.
“Having reached its cash neutrality target earlier in the year, we think the company will begin growing dividends more aggressively starting next year, and we think this is underappreciated by investors. Our top pick in E&P” he writes.
Indeed, the company already pays out a dividend yield of 4.8%. This is considerably higher than the basic materials average of just 2.53%, and generates an annual payout of $3.12 (paid quarterly).
Overall, OXY scores 13 buy ratings vs 4 hold ratings. However, if we zone in on only top-performing analysts, the sentiment becomes notably more bullish. Plus the average analyst price target shifts from $86 to $88:
Enjoy Research Reports on the Stocks in this Article:
Broadcom (AVGO) Research Report
Fibrogen (FGEN) Research Report
Lennar Corp (LEN) Research Report
Occidental Petroleum (OXY) Research Report
For the Street’s best-rated stock picks, check out TipRanks Trending Stocks tool. Find fresh investing inspiration from the stocks analysts are rating now. You can find ‘Strong Buy’ stocks in the sector that interests you now. Go to the Trending Stocks tool now.
