In an uncertain market (see our 2019 outlook) making money in stocks will require careful choices.
We think these eight companies, ranging from a money-center bank to a bargain-basement retailer, have solid prospects in 2019. We've also listed five you should consider parting ways with. Data is as of November 9.
Check them out.
Brookfield Asset Management
52-week low/high: $37.22/$45.04
Market value: $41.5 billion
P/E ratio: NA
Brookfield Asset Management (BAM, $43) is what you buy when you want to invest in something other than stocks and bonds. Brookfield owns a global portfolio of office, apartment and retail properties; it also owns 840 power plants that run on hydroelectricity, wind and other renewable technologies. Its infrastructure division invests in ports and railroads, and its private equity unit offers limited partnership stakes in real estate and energy. Brookfield benefits from large inflows from institutional investors, says Brian Milligan, of Ave Maria Growth Fund. "It has plenty of money to put to work."
52-week low/high: $70.09/$110.81
Market value: $51.8 billion
P/E ratio: 7
Celgene (CELG, $74) has a variety of drugs that fight cancer and autoimmune diseases. Its biggest seller, Revlimid, treats multiple myeloma; analysts at research firm CFRA believe the blockbuster drug can maintain sales growth rates in the teens through 2021. The firm also has a robust pipeline of new drugs, and Celgene bulls base their positive outlook for the stock on new-product launches expected in 2019 and 2020 that should diversify the company's revenues. CFRA analysts rate the stock a "strong buy" and say the market is underestimating the strength of Celgene's lineup.
52-week low/high: $65.14/$85.10
Market value: $40.7 billion
P/E ratio: 15
This IT consulting and services firm isn't the small, meteoric-growth name it once was, but Cognizant Technology (CTSH, $70) still finds ways to steadily boost earnings and revenues. Cognizant is focusing on its lucrative digital business, which helps clients with analytics, cloud computing and cybersecurity. The firm's digital revenue logged a growth rate of more than 20% in the third quarter of 2018 compared with the same period a year earlier, but it still represents just 30% of Cognizant's overall sales. That implies a "long runway of growth ahead" for Cognizant, according to CFRA, which rates the stock a "strong buy."
SEE ALSO: 10 Tech Stocks That Pay You to Own Them
52-week low/high: $51.32/$77.08
Market value: $134.4 billion
P/E ratio: 12
DowDuPont (DWDP, $59) will split into three in 2019. The agricultural group will break off as Corteva Agriscience, the materials division will be called Dow, and the specialty products businesses will be DuPont. Buy DowDuPont now, and you'll receive shares in all three new firms. That's a good thing: Spin-off shares tend to beat the market over the first two years, with the sum of the parts often adding up to more than the value of the whole. Even pre-split, the firm has good prospects. Analysts expect 16% profit growth in 2019 for the consolidated firm. The shares trade at just 12 times expected 2019 earnings.
52-week low/high: $42.04/$57.60
Market value: $219.4 billion
P/E ratio: 11
Shares in Intel (INTC, $48), one of the world's largest semiconductor firms, sell for 11 times the average of analysts' estimates for year-ahead earnings, compared with 17 times earnings for the average tech-sector stock. Intel is little changed over the past year, despite posting record earnings in the third quarter--up 47% from the same period 12 months ago. Although growth in PC chips is sluggish, Intel's other chips are picking up the slack. For instance, the firm's chips and associated hardware help power the fast-growing Internet of Things, and Intel's IoT sales reached record levels in the third quarter.
52-week low/high: $96.85/$119.33
Market value: $369.5 billion
P/E ratio: 11
Higher interest rates, lower tax rates, friendlier banking regulations and a strong U.S. economy have JPMorgan Chase (JPM, $111) "firing on all cylinders," says Morningstar's Eric Compton. Nearly half of all U.S. households do business with Chase. It's the country's biggest credit card issuer, top-ranked in global investment-banking fees and a leader in stock and bond trading. JPMorgan is "setting the pace and raising the bar," says Credit Suisse's Susan Roth Katzke. Expect more of the same in 2019, given a robust investment-banking pipeline and decent loan growth. JPM shares yield 2.88%.
SEE ALSO: Don't Give Up on Financial Stocks
Ollie's Bargain Outlet
52-week low/high: $43.05/$97.61
Market value: $5.7 billion
P/E ratio: 44
When e-commerce giants put brick-and-mortar retailers out of business, Ollie's (OLLI, $91) stands to gain. The retailer, with 285 stores in 22 states, sells closeout and overstocked merchandise at discounted prices. Store closings present Ollie's with prospective retail space to move into and low-cost inventory to sell, says Hodges Small Cap fund manager Eric Marshall. The chain can expand its locations by 10% per year over the next few years, he says. Ollie's is richly priced, trading at 44 times estimated earnings for the fiscal year that ends in January 2020. But analysts at Credit Suisse say the "near Amazon-proof" stock is worth it.
52-week low/high: $181.51/$249.95
Market value: $98.0 billion
P/E ratio: 20
Record spending on biotech drug research is fueling demand for Thermo Fisher's (TMO, $243) lab products and services, gene-sequencing instruments, analytical tools, and diagnostic kits. A string of smart, well-executed acquisitions by the company has boosted sales and earnings at a 10% annualized rate since 2013. The firm's long-term debt has risen, too, but in the past, "TMO has done a good job paying down debt," says Bryn Mawr Trust's Ernie Cecilia. Analysts expect 11% profit growth in 2019. The stock trades at 20 times estimated earnings, compared with an average multiple of 25 for its peers.
In a bull market closer to its end than its beginning, investors need to be choosy, trimming winners and tossing losers. Here are some candidates to cull.
52-week low/high: $57.41/$77.91
Market value: $54.4 billion
P/E ratio: 21
Executives at Colgate-Palmolive (CL, $64) have chalked up recent struggles to challenges in foreign markets, from which the maker of dental, hygiene and household products derives about three-fourths of its revenues. Weakening currencies are partly to blame. But even accounting for currency swings, the firm faces challenges from local competitors in foreign markets and from other multinationals, say JPMorgan analysts. They see the firm boosting earnings by only 2% in 2019 and say the shares could fall by 15%.
Sell: Seagate Technology
52-week low/high: $36.69/$62.70
Market value: $12.3 billion
P/E ratio: 8
Seagate Technology (STX, $43) makes great computer hard drives. Unfortunately, the industry is moving toward faster, solid-state drives. Seagate is moving into that business, too, but it's got stiff competition. And though Seagate has some big customers--HP Inc. and Dell each account for 10% of sales--they could easily jump to firms with better solid-state offerings. Trading at eight times estimated earnings for 2019, Seagate's stock is cheap, but it's no bargain, especially considering that the dividend has been flat since 2015.
Sell: Shake Shack
52-week low/high: $36.58/$70.12
Market value: $1.5 billion
P/E ratio: 70
Shares in quick-serve burger shop Shake Shack (SHAK, $51) were sizzling until an August earnings report with mixed results sent them tumbling. But the stock still trades at a whopping 70 times expected earnings in 2019, or more than three times the average restaurant stock multiple. Meanwhile, diner traffic is down at stores open at least 12 months, higher labor costs are squeezing profit margins, and new store openings--the main driver of growth--are delayed, in part because of labor shortages. Investors should take a healthy serving of profits off the table.
52-week low/high: $10.00/$15.60
Market value: $2.7 billion
P/E ratio: 8
Tegna (TGNA, $12) operates 47 television stations and two radio stations in 39 markets, and it offers marketing services through Tegna Marketing Solutions. Tegna does much better in election years than in nonelection years; the red-hot 2018 elections generated a 51% increase in political ad revenues from the previous midterms, for a record $60 million in the third quarter. But 2019 isn't an election year, and the rest of Tegna's business isn't going like gangbusters. Earnings comparisons with 2018 won't be pretty in 2019, and the shares are likely to suffer.
Sell: Under Armour
52-week low/high: $10.70/$22.68
Market value: $9.5 billion
P/E ratio: 83
Even after a spike in late 2018, shares of Under Armour (UA, $21) are far from their 2015 high. Investors hoping for a turnaround were impressed by the sportswear and apparel firm's third-quarter earnings. But competition remains steep, with Nike, Adidas and Lululemon vying for the same American customers. Analysts at Canaccord Genuity say they've yet to see product-line innovations that would propel the company back to consistent growth in North America. They believe the stock is overpriced at 83 times estimated 2019 earnings and recommend selling it.
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Copyright 2018 The Kiplinger Washington Editors