Alpha is one of those confusing terms that is used in the financial industry but rarely defined. It is basically a performance measurement on a risk-adjusted basis. Alpha takes the volatility or price risk of an investment vehicle like a mutual fund and compares its risk-adjusted return to a benchmark index like the S&P 500. If the fund is up 15% and the S&P 500 is up 10%, the 5% difference is the alpha.
The UBS Alpha Preferences is not a rating system, it is a list of "most" and "least" preferred stock selections on a sector-relative basis for 41 of the major industries the firm covers in North America. The duration of the expected relative out- or underperformance generally is expected to be 60 to 90 days. In a new research report, UBS A.G. (UBS) updates current names and add some top new stocks to buy.
Fusion-io Inc. (FIO) is a top enterprise storage company focused on technologies such as flash memory and solid-state drives. The company posted very strong earnings in the past quarter and it also had a very upbeat outlook for the rest of 2013. The Thomson/First Call price target of the stock is $20.
IntercontinentalExchange Inc. (ICE) provides futures exchange, over-the-counter market, derivatives clearing house and post-trade services for trading and clearing a range of contracts based on crude and refined oil, natural gas, power, coal, emissions, sugar, cotton, coffee, cocoa, canola, frozen concentrated orange juice, credit default swaps, currencies and equity indexes. The consensus price target for this top name is $193.
Ingersoll-Rand PLC (IR) is one of the top holdings of billionaire Nelson Peltz's Trian Partners public-equity portfolio. Trian holds almost 5% of the industrial stock. The consensus price target stands at $65, and investors are paid a 1.4% dividend.
Las Vegas Sands Corp. (LVS) is a huge benefactor of the gaming surge at the Macau-based casinos in China. Sands China has a strong 20% market share in Macau and is growing that percentage fast. Sands China, which reports quarterly, saw EPS rise 16%, 49% and 62% in the past three periods. Revenue climbed 36%, 48% and 39%, respectively. The consensus price target for the stock is $66. Shareholders are paid a 2.5% dividend. A move to the price target would be a gain of more than 20% for investors.
Beazer Homes USA Inc. (BZH), like most American home builders, has been on a tear the past few years. Last quarter, Beazer reported revenue of $287.9 million. GAAP reported sales were 50% higher than the prior-year quarter's $191.6 million. The company is expected to report third-quarter numbers tomorrow. The consensus price objective for the stocks is $20.
Expedia Inc. (EXPE) operates as an online travel company in the United States and internationally. It provides travel products and services to leisure and corporate travelers, offline retail travel agents,and travel service providers through a portfolio of brands, including Expedia.com, Hotels.com, Hotwire.com, Expedia Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia, Expedia CruiseShipCenters, eLong and Venere.com. The consensus price target for this top travel name is $61. Investors are paid a 1.1% dividend. A move to the target would represent a 30% gain for investors.
Gilead Sciences Inc. (GILD) is the Alpha Preference favorite in the biotechnology sector. Recent strong earnings were fueled by a good showing from the company's two best-selling HIV medications, Atripla and Truvada. The two drugs performed well, with sales up 4% and 3%, respectively. Total product sales increased 14% to $2.66 billion for the period ended June 30. Moreover, Gilead reported strong growth in its new, single tablet HIV combination of Complera and Eviplera, where sales rose a whopping 159% to $188.7 million. The consensus price target for this well-owned name is $72.
Chevron Corp. (CVX) is a top integrated oil and gas name to make the list. Strong and consistent crude pricing has driven share pricing to all-time highs. The company has increased its annual dividend for 26 consecutive years. The consensus price target for the stock is $131.50, and investors receive a solid 3.1% dividend.
Comcast Corp. (CMCSA) continues to be the most dominant cable player in the United States. With possible consolidation in the industry, it makes sense for investors to own a top name like Comcast. The consensus price target for the stock is at $48, and shareholders are paid a 1.8% dividend.
The UBS Alpha methodology provides an alternative and differentiated view of how the analysts assess investment opportunities, and complements their absolute-return based research rating system (which includes ratings and 12-month price targets). For investors, it is important to remember that in most cases the time horizon for these names is shorter than the standard 12 to 18 month window. It may make sense to appropriate trading or speculative capital toward these stocks selections.