For 2014, the Baird research team has combined an interesting list of what some investors would consider true value stocks, and slowing growth stocks. What the analysts at Baird have determined is that many of the former tech titans of the 1990s and other companies where growth and stock price action has slowed down are now relative value names. There seems to be a growing consensus on Wall Street that more and more names that once dominated the growth arena, but have been mired in sideways price moves for years, are indeed value names now.
The team at Baird is following a strategy for 2014 that many firms are. They are positive on the stock market, although less exuberant than some firms. They favor cyclical stocks, with technology, financial and health care names leading the way. Here are some of the top value and relative value stocks to buy from Baird for 2014.
CarMax Inc. (KMX) has benefited from the huge need for consumers to replace their cars and trucks after years of waiting. The company excels in the pre-owned area, and business looks solid for 2014. Though CarMax does not offer the same manufacturer used car incentives, it does have its own coverage to encourage people to buy used. In the company's third quarter, sales grew 13% to $3.94 billion. Same-store sales grew an impressive 10%, while total used unit sales jumped up by 15%. The price target at Baird is $55, and the Thomson/First Call consensus is set at $54.50. CarMax closed Tuesday at $45.34.
Cisco Systems Inc. (CSCO) is the networking leader and may be poised to have a monster 2014. In addition, the company has been looking to protect its core business from new competition. Last year it bought out the remainder of its majority-owned data center technology start up called Insieme, in a deal that could cost up to $863 million. Investors are paid a 3.1% dividend. The Baird price target for the stock is $26. The consensus estimate is at $24.50. Cisco closed Tuesday at $22.31.
EMC Corp. (EMC) is not only the leader in large-scale storage, its majority ownership in cloud software company VMware makes it the ultimate tech double-threat. The Baird price target for the stock is $32, and the consensus price target for the stock is posted at $30. Investors are paid a 1.6% dividend. EMC closed Tuesday at $25.55.
Global Payments Inc. (GPN) is another top value idea at Baird. The company provides electronic payment transaction processing services worldwide. The company serves as the processing intermediary between the merchant, the credit and debit networks, and the financial institutions that issue cards. Investors are paid a miniscule 0.1% dividend. The price target at Baird is set at $76, and the consensus target is $66.50. The stock closed Tuesday at $64.89.
HCA Holdings Inc. (HCA) is one of the top hospital names to buy on the Baird Value list. They believe HCA has scale advantages as the largest private hospital operator in the United States and is diversified geographically. The company also benefits from local market density, with the number one or number two market share in most of its local markets. They also view the company's experienced management team as a strong positive. The Baird Price target is $57. The consensus target is $55. HCA closed Tuesday at $49.85.
J.P. Morgan Chase & Co. (JPM) is another "relative value" pick to buy at Baird for 2014. As the year begins, the company may finally be nearing the end of a bad year for losses and penalty payouts. The company is expected to benefit from commercial loan growth and an upturn in capital spending. Investors are paid a 2.6% dividend. The Baird price target is posted at $65, and the consensus is at $64.35. J.P. Morgan closed Tuesday at $58.32.
Plains All American Pipeline L.P. (PAA) remains a top name to buy at most of the Wall Street firms we cover. The company has decided to invest $120 million in two projects in the Eagle Ford area. The company is developing a new natural gas liquid (NGL) fractionator, which will be in La Salle County, Texas. NGL will be sourced from the company's Eagle Ford-producing region and will be processed and fractionated. This project, designed to fractionate up to 15,000 barrels of NGL per day, is expected to be operational by the second quarter of 2015. Investors are paid a 4.7% distribution. Baird has a $60 price target, the same as the consensus target. Shares closed Monday at $50.98.
Swift Transportation Co. (SWFT) is a top transport to buy for 2014 at Baird. Swift is a stock that may have huge upside if the shorts who are currently circling the stock are wrong. A staggering 31.1% of the shares have been sold short, despite the fact that earnings estimates have been raised. Baird has posted a price target of $28. The consensus is at $26. Swift closed Tuesday at $20.60.
Whiting Petroleum Corp. (WLL) is a large energy player in the Bakken shale and is ranked as the third largest producer there. Over 2013, Whiting sold off significant amounts of its assets that were not in the Bakken, including its Postle Field enhanced oil recovery assets for $817 million and its acreage in the Delaware Basin for $150 million. The company in turn is using the cash from the sales and deploying more assets into the higher-return Bakken. The Baird price target for the stock is $81, and the consensus figure is at $78. Whiting closed Tuesday at $59.29.
Whether true value or relative value, after an incredible rise in the markets in 2013, it is a good idea for investors to review their portfolios for stocks that are overvalued. With almost all the firms we cover expecting a major election year decline, pulling some high flyers and replacing them with solid value names may be a good tactical move early in the year.