All of the Wall Street firms we cover, especially the large bulge bracket firms, have an extensive equity coverage list. In many cases the large firms cover more than 500 individual domestic and international stocks. UBS A.G. (UBS) is no different with a huge equity coverage universe. Its High Conviction call list is the best of the best. Each sector analyst is required to produce one high conviction call. They may use their own criteria, from greatest upside potential to most compelling investment case to deepest value play. We screened the UBS list for the top stocks to buy from each sector, looking for good dividend and earnings growth.
Ford Motor Co. (NYSE:F) continues to lead the comeback of the American automobile industry. With the sales-leading F series truck line and a host of new models that consumers are embracing, Ford also is looking for strong international sales to boost earnings. The UBS price target for this high conviction consumer discretionary name is $20. The Thomson/First Call estimate is at $18. Investors are paid a 2.4% dividend.
Coca-Cola Co. (KO) is the top pick in the consumer staples sector. Coke remains one of the top holdings for Warren Buffett and is an iconic American brand the has tremendous name recognition and sales around the world. The UBS price target for the stock is at $45, and the consensus number is at $45.50. Investors receive a 2.7% dividend.
Schlumberger Ltd. (SLB) is the energy sector high conviction stock to buy. When the company reported earnings on July 19, CFO Simon Ayat projected strong cash flow over the next five years, which will allow the company to increase share buybacks and take advantage of growth opportunities. UBS has set a $94 price target for the oilfield services giant. The consensus target for the stock is $96. Investors are paid a 1.6% dividend.
J.P. Morgan Chase & Co. (JPM) has a strong balance sheet with ample loan loss reserves, but it also has exposure to rebounding capital markets and consumer trends, which should propel earnings power going forward. An improving economy also is putting a wind behind the bank's efforts to increase its domestic business. UBS has a projected target of $64, while the consensus figure is at $62. Investors receive a 2.7% dividend.
Humana Inc. (HUM) tops the list in health care. The company recently announced that it has signed a definitive agreement to acquire American Eldercare, the largest provider of nursing home diversion services in the state of Florida (serving frail and elderly individuals in home and community-based settings). Terms of the transaction were not disclosed, but it is another fast growing care segment that will help to generate earnings growth. UBS has a $94 price target on the stock, while the consensus is at $90. Shareholders are paid a 1.2% dividend.
Emerson Electric Co. (EMR) is the top high conviction name to buy in the industrials sector. Over the past 50 years, the company’s management has consistently increased the annual dividend. With a balanced domestic and foreign business, Emerson should be able to dodge any restrictive currency issues. The UBS price target for the stock is $65, and the consensus target is lower at $60. Investors receive a 2.8% dividend.
Qualcomm Inc. (QCOM) makes the high conviction list in information technology. With surging revenue from smartphone chip sales and strong royalty revenues to smooth out earnings forecasts, the company continues with a very hot hand in technology. The UBS price objective is $75, the same as the consensus target. Investors receive a 2.3% dividend.
Dow Chemical Co. (DOW) is the winner in the materials sector. Cheap natural gas is helping the chemical industry grow and prosper. Dow is spending $4 billion to build factories in Freeport, Tex., and reopen a plant in Hahnville, La., creating 500 manufacturing and 5,000 construction jobs. Five years ago the company was closing U.S. plants and moving production to the Middle East to gain access to cheaper raw materials and be closer to Asian markets. UBS has set a $40 price target for the stock, but the consensus target is $36. Investors are paid a solid 3.7% dividend.
American Tower Corp. (AMT) is the high conviction telecommunications name to buy. International growth is helping to keep the company on a strong earnings growth trajectory. The UBS price objective for the wireless tower leader is $87, and the consensus number is at $90. Investors are paid a 1.5% dividend.
The combination of top growth prospects with solid dividends and dividend growth make the UBS high conviction stock picks suitable for almost any equity portfolio. Again, after such a strong leg up in the markets since the June lows, investors may want to scale in or buy partial positions now, and look for an August sell-off to add more at lower prices.