10 Stocks to Build the Model Post-Dip Portfolio

Wayne Duggan
0

Here's a top-tier list for investors to consider.

The COVID-19 stock market sell-off has given long-term investors the opportunity to build a portfolio of investments from scratch by buying stocks at a significant discount to where they were trading during the historic bull market. However, the near-term economic uncertainty has created significant risk for investors, and some companies may not be able to weather the storm. The CFRA analyst team recently updated its Top 10 Model Portfolio, a list of CFRA's top-tier stock picks for investors building a portfolio for at least the next 12 months. Here are CFRA's 10 stock picks to build the model portfolio.

Alexandria Real Estate Equities (ticker: ARE)

Alexandria Real Estate Equities is a real estate investment trust, or REIT, that focuses on life sciences office and laboratory space. Analyst Kenneth Leon says Alexandria is one of the few REITs in growing markets that has no major peers. Leon says demand for life sciences real estate should outpace supply in coming years, and Alexandria's properties are already nearly 100% leased. Alexandria grew revenue by 16% in 2019, and Leon is projecting at least 14% revenue growth in each of the next two years. CFRA has a "strong buy" rating and $195 price target for ARE stock.

CenterPoint Energy (CNP)

CenterPoint Energy is an electricity and natural gas delivery company that has an ownership interest in an oil and gas midstream master limited partnership. Analyst Christopher Muir says CenterPoint's 9.4% dividend yield coupled with its top-tier earnings growth outlook for 2020 and beyond makes the stock a tremendous long-term value at recent levels. Muir says CenterPoint's $13.2 billion capital spending plan through 2024 should drive higher rates for the company over time. He is projecting 12.3% revenue growth in 2020. CFRA has a "strong buy" rating and $29 price target for CNP stock.

CVS Health Corp. (CVS)

CVS Health is the largest U.S. pharmacy health care provider. Analyst Kevin Huang says CVS was trading at the low end of its historical earnings multiple range even before the recent market sell-off. Health care stocks like CVS offer investors the type of defensive characteristics and potential earnings growth that is in high demand during an economic downturn. CVS began testing its HealthHUB store remodels in 2019, and Huang says the company should benefit from expanding HealthHUBs to 14 metro areas by mid-2020. CFRA has a "strong buy" rating and $86 price target for CVS stock.

Fiserv (FISV)

Fiserv provides technology for the financial industry, including banks, credit unions and investment management firms. Analyst David Holt says Fiserv has a high-quality business model that generates durable margins and reliable free cash flow. He says Fiserv's First Data merger should generate $1.2 billion in cost synergies over time, and Fiserv's recent client wins won't be reflected in its financials until late 2020. Holt is projecting revenue will grow 7% in 2020 and 8% in 2021, and operating margin will expand by 2.6% this year. CFRA has a "buy" rating and $140 price target for FISV stock.

FMC Corp. (FMC)

FMC is one of the largest producers of insecticides, herbicides and fungicides for the agricultural industry. Muir says strong trends in agriculture should lead to volume growth for FMC over the next two years, especially in Latin America. In addition, he says FMC will likely invest in research and development and potentially even bolt-on acquisitions to beef up its product portfolio. FMC generates plenty of cash flow to cover these expenses while also paying down debt and returning capital to shareholders via dividends and buybacks. CFRA has a "strong buy" rating and $125 price target for FMC stock.

Lockheed Martin Corp. (LMT)

Lockheed Martin designs and operates advanced technology systems for the defense industry and is the prime contractor for the F-35 Joint Strike Fighter jet. Analyst Colin Scarola says he is bullish on defense industry demand over the next several years, especially if President Donald Trump is reelected in November. Scarola says Lockheed is a blue-chip stock with strong, reliable cash flow and a long-term growth opportunity given the ramp-up of the F-35 program, which accounts for about 25% of total revenue. CFRA has a "strong buy" rating and $523 price target for LMT stock.

Salesforce.com (CRM)

Salesforce provides on-demand cloud-based customer relationship management services. Analyst John Freeman says Salesforce is one of the most disruptive and innovative companies in the software space, yet its stock is trading at an extremely attractive valuation. Freeman says Salesforce still has plenty of market share to gain from legacy, on-premise software providers. He says Salesforce has by far the most comprehensive software suite of customer relationship management offerings. Freeman is projecting 23% compound annual revenue growth over the next three years. CFRA has a "strong buy" rating and $222 price target for CRM stock.

T-Mobile (TMUS)

T-Mobile is the third-largest U.S. wireless provider and will soon be much larger after it completes its merger with Sprint Corp. (S). Analyst Keith Snyder says the merger will create $6 billion in annual cost synergies and the combined company will generate impressive free cash flow growth. Snyder says post-merger T-Mobile will likely launch an aggressive advertising campaign to apply pressure to AT&T (T) and Verizon Communications (VZ). Snyder is projecting 5.3% revenue growth in 2020 and 5.4% growth in 2021. CFRA has a "strong buy" rating and $110 price target for TMUS stock.

Walt Disney Co. (DIS)

Walt Disney made an aggressive push to transition its business to a direct-to-consumer model in November when it launched its Disney Plus streaming platform. Analyst Tuna Amobi says Disney's new CEO Robert Chapek has big shoes to fill in replacing Robert Iger, but Chapek has nearly 30 years of experience working closely with Disney's filmed entertainment, theme parks and consumer products businesses. Amobi says the Disney Plus launch appears to have been a success and Disney's acquisition of Fox assets last year significantly improved its content library. CFRA has a "buy" rating and $160 price target for DIS stock.

Walmart (WMT)

Walmart was one of the top stock performers during the last U.S. recession in 2008 and 2009. Analyst Garrett Nelson says Walmart's online sales growth has been impressive. Walmart has the second-largest market share of U.S. online sales, yet Nelson says its stock trades at a significant valuation discount to market leader Amazon.com (AMZN). Nelson says that valuation gap will likely close over time as e-commerce sales continue to grow and Amazon and Walmart emerge as the clear winners in the space. CFRA has a "buy" rating and $130 price target for WMT stock.

Stocks to Build the Model Post-Dip Portfolio:

-- Alexandria Real Estate Equities (ARE)

-- CenterPoint Energy (CNP)

-- CVS Health Corp. (CVS)

-- Fiserv (FISV)

-- FMC Corp. (FMC)

-- Lockheed Martin Corp. (LMT)

-- Salesforce.com (CRM)

-- T-Mobile (TMUS)

-- Walt Disney Co. (DIS)

-- Walmart (WMT)



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