By Steve Reitmeister, Editor in Chief of TipRanks
This is my fifth article in a series sharing my best stock ideas for the year ahead. Last week I highlighted my favorite large cap stocks. Also check out recent articles on small caps, tech stocks and value picks.
Today’s focus is one of the most popular groups of stocks: Growth & Income. The widespread appeal comes the blend of solid price appreciation and dividend income to create an attractive total return. Yes, these are often considered more conservative selections. However, I set my sights on 3 with a bit more growth, and a tad less income, in the hopes of generating more upside potential. Learn more about each below:
The Discount in American Eagle Stock Is Quite Attractive
American Eagle Outfitters (AEO) provides a great way to take advantage of a very healthy US consumer. In this case it is a leading apparel company focused on young consumers. I can tell you for sure it is the most popular store for my two daughters (17 and soon to be 19). In fact, my paycheck goes to AEO first and they send me back the remainder 😉
Bloggers and News Sentiment are clear Positives in their corner. Also Hedge Funds have been very active adding shares. But it is the analyst affection that stands out the most as they got a fresh round of Buys after their last earnings announcement.
The average target price is now at $25.88 which is a XL sized increase over the current price. Even better is the $29 street high target which seems quite doable if they keep their growth trajectory on track.
The bonus on this stock is that it recently got put on the discount rack. That’s because after rallying mightily to start the year, it endured a round of profit taking that trimmed shares by 10%. So now seems like a great time to checkout AEO. And while we wait for shares to move back up to full price, we also get to enjoy an ample 2.8% dividend yield.
Marathon Petroleum Stock Is Bound to Make a Comeback
Let’s start with some important clarification. Marathon Petroleum (MPC) is the refining and marketing arm of Marathon that spun off from the exploration part, Marathon Oil Corporation, back in 2011. This is a much more stable business and not as focused on the daily price of oil to determine earnings outlook and share price value.
Most people think of Marathon gas stations when they focus on the marketing business. Yet the much better growth story is their Speedway brand with over 2,200 locations nationwide. On top of that you have the fact that in the US there has been a shocking underinvestment in oil refining capacity over the past 40 years. This gives much better pricing power to top players like Marathon to squeeze out more profit from each barrel.
Shares got as high as $88.45 before the correction took its toll. Now shares stand around $65 when the earnings outlook remains robust and the average target price is $92.29 (41% upside potential).
If that was not good enough we also have two vital TipRanks indicators in our favor; Insiders and Hedge Fund Managers. Both of these signals are skewing as firmly positive as possible which is a good leading indicator of future outperformance.
Hopefully you agree with me that there are many good reasons to pump some of these gas shares into our portfolio. If you need one more it should be that management recently raised their dividend by 15% to a very tempting 3.3%.
Ryder System Stock Is Coming to Life Again
Ryder System (R) is a leading transportation and supply chain management company. It was actually one of my favorite stocks several years back as they were a steady outperformer. Then the wheels fell off the wagon in 2015 and it took 2 years until management got operations going back in the right direction.
Their 2/14 earnings announcement made it loud and clear that a healthy turnaround was firmly in place. Not only did they beat both revenue and earnings estimates, but they also guided higher projections nicely for 2019. The star of the show was them locking in new contracts that helped them generate higher sales in all 3 of their major business segments and makes them feel comfortable that next year will be better than previously expected.
Analysts are happy with what they see with a nice round of raised estimates and target prices. In addition 4 other TipRanks indicators are pointing positive: Individual Investors, Bloggers, News Sentiment and Hedge Fund Managers. Beyond these attractive capital appreciation indicators, Ryder also sports the highest dividend yield of the three stocks shared today at 3.4%.
(AEO, MPC and R are just 3 of the stocks I have selected for the Smart Investor portfolio. There you will see many others stocks loaded with positive TipRanks indicators that are primed to outperform in the year ahead. Discover the Smart Investor portfolio here)
Disclaimer: In general, I own the stocks that I highlight in commentary. When you think about it…why would you ever take advice from an investment professional who wasn’t willing to put his money where his mouth is?