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July 7, 2020, 7:49 a.m. EDT

10 stock picks from Jefferies for investors who want to be ‘trendy’ as the economy recovers

U.S. industrial activity perked up in June — three sectors tend to outperform when that happens

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By Philip van Doorn, MarketWatch


Methanex Inc.
A Methanex methanol production facility in Trinidad. Analysts at Jefferies expect the company’s stock to nearly double over the next 12 months.

You might find it strange to associate the word “trendy” with stocks in the industrial, materials and financial sectors. Analysts at investment bank Jefferies have done just that in a report that looks forward through the economic-recovery cycle that started in June.

The catalyst for the Jefferies analysts was the Institute for Supply Management’s manufacturers’ purchasing managers index (PMI) released July 1. It rose to 52.6% in June from 43.1% in May. A reading above 50% indicates expansion. The non-manufacturers’ PMI made an even sharper turnaround, to a reading of 57.1% in June , up from 45.4% in May. That report was published July 6.

On July 5, analysts at Jefferies suggested sectors for investors to “stay trendy.”

“Typically, Industrials, Materials and Financials outperform once the ISM is >50,” the analysts wrote.

Those sectors have been out of favor through the worst of the coronavirus crisis and the U.S. stock market’s recovery. Here’s how the 11 sectors have performed this year, as the S&P 500 was down only 2.1% for 2020 (with dividends reinvested) through July 2:

S&P 500 sector Total return - 2020
Information Technology 15.7%
Consumer Discretionary 9.5%
Communications Services 1.9%
Health Care 0.6%
Materials -5.0%
Consumer Staples -5.2%
Real Estate -6.5%
Utilities -8.9%
Industrials -14.4%
Financials -24.3%
Energy -36.2%
Source: FactSet

Jefferies’ favorites

Jefferies actually listed 30 buy-rated stocks in the three sectors for their clients. So we’re listing the 10 with the most 12-month upside potential based on the analysts’ price targets. We’ll take a broader look at the three sectors after that.

Here are the 10 stocks rated “buy” by Jefferies analysts in their “How to Stay Trendy for the Next Cycle” report, with the most implied upside potential over the next 12 months:

Company Ticker Industry Current price Jefferies' price target Implied 12-month upside potential Total return - 2020
Methanex Corp. /zigman2/quotes/207995377/composite MEOH Chemicals $18.75 $36 92.0% -50%
First Quantum Minerals Ltd. /zigman2/quotes/209694942/delayed CA:FM Metals/Minerals $10.66 $18 68.9% -19%
Freeport-McMoRan Inc. /zigman2/quotes/200215692/composite FCX Metals/Minerals $11.50 $17 47.8% -12%
Huntsman Corp. /zigman2/quotes/202684633/composite HUN Chemicals $17.88 $25 39.8% -24%
Owens Corning /zigman2/quotes/202113551/composite OC Containers/Packaging $54.06 $75 38.7% -16%
TopBuild Corp. /zigman2/quotes/201668256/composite BLD Building Products $111.74 $150 34.2% 8%
ConocoPhillips /zigman2/quotes/207605056/composite COP Oil & Gas Production $41.78 $56 34.0% -35%
HD Supply Holdings Inc. Wholesale Distributors $33.97 $45 32.5% -16%
BASF SE /zigman2/quotes/204280060/delayed DE:BAS Chemicals € 50.47 € 66 30.8% -20%
State Street Corp. /zigman2/quotes/209758976/composite STT Regional Banks $63.13 $82 29.9% -19%
Sources: Jefferies Group, FactSet

Scroll the table to see all of the data. Click on the tickers for more about each company.

Data in the “current price” column is from the close July 2, except for First Quantum Minerals /zigman2/quotes/209694942/delayed CA:FM -2.03%  of Toronto, with a closing price in Canadian dollars as of July 3, and BASF SE /zigman2/quotes/204280060/delayed DE:BAS +1.27%  of Germany, with a closing price in euro as of July 3.

A deep dive into the S&P 500

The industrials, materials and financial sectors of the S&P 500 include 167 stocks. Here are the 20 with majority “buy” ratings among Wall Street analysts polled by FactSet that have the most upside potential based on consensus price targets:

Company Ticker Industry Share 'buy' ratings Closing price - July 2 Consensus price target Implied 12-month upside potential Total return - 2020
Assurant Inc. /zigman2/quotes/202796064/composite AIZ Multi-Line Insurance 100% $100.50 $140.33 40% -23%
L3Harris Technologies Inc. /zigman2/quotes/201997607/composite LHX Aerospace & Defense 95% $172.00 $240.11 40% -12%
Mosaic Co. /zigman2/quotes/203825795/composite MOS Chemicals 55% $12.85 $17.53 36% -40%
Hartford Financial Services Group Inc. /zigman2/quotes/207281914/composite HIG Multi-Line Insurance 78% $37.50 $50.69 35% -37%
Delta Air Lines Inc. /zigman2/quotes/200327741/composite DAL Airlines 63% $27.72 $36.31 31% -52%
Lincoln National Corp. /zigman2/quotes/205272400/composite LNC Life/Health Insurance 54% $34.61 $45.25 31% -40%
Citigroup Inc. /zigman2/quotes/207741460/composite C Financial Conglomerates 84% $50.55 $65.28 29% -36%
Capital One Financial Corp. /zigman2/quotes/204480509/composite COF Major Banks 74% $61.15 $77.89 27% -40%
Northrop Grumman Corp. /zigman2/quotes/205518355/composite NOC Aerospace & Defense 75% $309.97 $389.21 26% -9%
Raytheon Technologies Corp. /zigman2/quotes/203237915/composite RTX Aerospace & Defense 71% $61.79 $75.89 23% -29%
Citizens Financial Group Inc. /zigman2/quotes/205410375/composite CFG Regional Banks 80% $23.76 $28.97 22% -40%
General Electric Co. /zigman2/quotes/208495069/composite GE Aerospace & Defense 62% $6.82 $8.28 21% -39%
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV Airlines 60% $34.12 $41.22 21% -37%
Bank of America Corp /zigman2/quotes/200894270/composite BAC Major Banks 62% $23.29 $28.09 21% -33%
MetLife Inc. /zigman2/quotes/206319319/composite MET Life/Health Insurance 64% $35.65 $42.83 20% -28%
Lockheed Martin Corp. /zigman2/quotes/200691238/composite LMT Aerospace & Defense 57% $362.00 $429.53 19% -6%
Fifth Third Bancorp /zigman2/quotes/207561596/composite FITB Regional Banks 58% $18.57 $22.01 19% -38%
Alaska Air Group Inc. /zigman2/quotes/200972303/composite ALK Airlines 71% $36.49 $43.21 18% -46%
Newmont Corp. /zigman2/quotes/205356474/composite NEM Precious Metals 71% $60.96 $71.95 18% 41%
Truist Financial Corp. /zigman2/quotes/200481602/composite TFC Regional Banks 63% $36.42 $42.84 18% -34%
Source: FactSet
/zigman2/quotes/207995377/composite
US : U.S.: Nasdaq
$ 37.94
-2.55 -6.30%
Volume: 539,006
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.40%
Market Cap
$3.08 billion
Rev. per Employee
$2.13M
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/zigman2/quotes/209694942/delayed
CA : Canada: Toronto
$ 23.70
-0.49 -2.03%
Volume: 3.14M
Jan. 20, 2021 5:40p
P/E Ratio
N/A
Dividend Yield
0.04%
Market Cap
$16.68 billion
Rev. per Employee
$202,592
loading...
/zigman2/quotes/200215692/composite
US : U.S.: NYSE
$ 30.97
-0.74 -2.33%
Volume: 17.34M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$46.07 billion
Rev. per Employee
$522,036
loading...
/zigman2/quotes/202684633/composite
US : U.S.: NYSE
$ 28.16
+0.06 +0.21%
Volume: 945,416
Jan. 20, 2021 4:00p
P/E Ratio
596.61
Dividend Yield
2.31%
Market Cap
$6.20 billion
Rev. per Employee
$679,700
loading...
/zigman2/quotes/202113551/composite
US : U.S.: NYSE
$ 86.94
+2.49 +2.95%
Volume: 1.16M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
1.20%
Market Cap
$9.14 billion
Rev. per Employee
$376,842
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/zigman2/quotes/201668256/composite
US : U.S.: NYSE
$ 215.43
+5.43 +2.59%
Volume: 406,292
Jan. 20, 2021 4:00p
P/E Ratio
32.41
Dividend Yield
N/A
Market Cap
$6.94 billion
Rev. per Employee
$252,319
loading...
/zigman2/quotes/207605056/composite
US : U.S.: NYSE
$ 45.36
-0.64 -1.39%
Volume: 21.18M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
3.79%
Market Cap
$62.31 billion
Rev. per Employee
$3.12M
loading...
/zigman2/quotes/204280060/delayed
DE : Germany: Frankfurt
67.60
+0.85 +1.27%
Volume: 7,339
Jan. 20, 2021 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€512,034
loading...
/zigman2/quotes/209758976/composite
US : U.S.: NYSE
$ 76.64
-1.76 -2.24%
Volume: 3.54M
Jan. 20, 2021 4:00p
P/E Ratio
12.14
Dividend Yield
2.71%
Market Cap
$27.66 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/209694942/delayed
CA : Canada: Toronto
$ 23.70
-0.49 -2.03%
Volume: 3.14M
Jan. 20, 2021 5:40p
P/E Ratio
N/A
Dividend Yield
0.04%
Market Cap
$16.68 billion
Rev. per Employee
$202,592
loading...
/zigman2/quotes/204280060/delayed
DE : Germany: Frankfurt
67.60
+0.85 +1.27%
Volume: 7,339
Jan. 20, 2021 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€512,034
loading...
/zigman2/quotes/202796064/composite
US : U.S.: NYSE
$ 142.01
-0.97 -0.68%
Volume: 277,160
Jan. 20, 2021 4:00p
P/E Ratio
21.60
Dividend Yield
1.86%
Market Cap
$8.48 billion
Rev. per Employee
$709,331
loading...
/zigman2/quotes/201997607/composite
US : U.S.: NYSE
$ 188.38
-1.72 -0.90%
Volume: 1.04M
Jan. 20, 2021 4:00p
P/E Ratio
31.19
Dividend Yield
1.80%
Market Cap
$39.94 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203825795/composite
US : U.S.: NYSE
$ 28.50
-0.21 -0.73%
Volume: 3.63M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.70%
Market Cap
$10.88 billion
Rev. per Employee
$706,849
loading...
/zigman2/quotes/207281914/composite
US : U.S.: NYSE
$ 52.49
-0.17 -0.32%
Volume: 1.48M
Jan. 20, 2021 4:00p
P/E Ratio
10.99
Dividend Yield
2.48%
Market Cap
$18.87 billion
Rev. per Employee
$1.06M
loading...
/zigman2/quotes/200327741/composite
US : U.S.: NYSE
$ 41.62
+1.31 +3.25%
Volume: 11.34M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$25.71 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/205272400/composite
US : U.S.: NYSE
$ 52.47
-0.14 -0.27%
Volume: 1.00M
Jan. 20, 2021 4:00p
P/E Ratio
13.20
Dividend Yield
3.20%
Market Cap
$10.17 billion
Rev. per Employee
$1.52M
loading...
/zigman2/quotes/207741460/composite
US : U.S.: NYSE
$ 63.25
-0.44 -0.69%
Volume: 17.45M
Jan. 20, 2021 4:00p
P/E Ratio
12.57
Dividend Yield
3.23%
Market Cap
$132.61 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/204480509/composite
US : U.S.: NYSE
$ 111.38
-1.48 -1.31%
Volume: 3.93M
Jan. 20, 2021 4:00p
P/E Ratio
55.92
Dividend Yield
0.36%
Market Cap
$51.62 billion
Rev. per Employee
$649,595
loading...
/zigman2/quotes/205518355/composite
US : U.S.: NYSE
$ 298.78
+0.76 +0.26%
Volume: 985,825
Jan. 20, 2021 4:00p
P/E Ratio
20.44
Dividend Yield
1.94%
Market Cap
$49.68 billion
Rev. per Employee
$376,011
loading...
/zigman2/quotes/203237915/composite
US : U.S.: NYSE
$ 68.84
-0.52 -0.75%
Volume: 4.66M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.76%
Market Cap
$105.34 billion
Rev. per Employee
$317,011
loading...
/zigman2/quotes/205410375/composite
US : U.S.: NYSE
$ 40.09
-0.74 -1.81%
Volume: 3.99M
Jan. 20, 2021 4:00p
P/E Ratio
18.16
Dividend Yield
3.89%
Market Cap
$17.44 billion
Rev. per Employee
$1.37M
loading...
/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 11.39
-0.04 -0.35%
Volume: 59.02M
Jan. 20, 2021 4:00p
P/E Ratio
27.24
Dividend Yield
0.35%
Market Cap
$100.13 billion
Rev. per Employee
$463,683
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 48.21
+1.30 +2.77%
Volume: 6.97M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$27.70 billion
Rev. per Employee
$368,882
loading...
/zigman2/quotes/200894270/composite
US : U.S.: NYSE
$ 32.34
-0.43 -1.31%
Volume: 53.92M
Jan. 20, 2021 4:00p
P/E Ratio
15.99
Dividend Yield
2.23%
Market Cap
$283.49 billion
Rev. per Employee
$547,433
loading...
/zigman2/quotes/206319319/composite
US : U.S.: NYSE
$ 51.65
-0.47 -0.90%
Volume: 4.81M
Jan. 20, 2021 4:00p
P/E Ratio
8.48
Dividend Yield
3.56%
Market Cap
$46.91 billion
Rev. per Employee
$1.42M
loading...
/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 341.67
+0.17 +0.05%
Volume: 1.78M
Jan. 20, 2021 4:00p
P/E Ratio
14.72
Dividend Yield
3.04%
Market Cap
$95.55 billion
Rev. per Employee
$543,745
loading...
/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 31.33
-0.74 -2.31%
Volume: 4.87M
Jan. 20, 2021 4:00p
P/E Ratio
15.64
Dividend Yield
3.45%
Market Cap
$22.85 billion
Rev. per Employee
$472,545
loading...
/zigman2/quotes/200972303/composite
US : U.S.: NYSE
$ 55.81
+1.10 +2.01%
Volume: 1.15M
Jan. 20, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$6.77 billion
Rev. per Employee
$363,844
loading...
/zigman2/quotes/205356474/composite
US : U.S.: NYSE
$ 63.52
+1.67 +2.70%
Volume: 6.53M
Jan. 20, 2021 4:00p
P/E Ratio
20.02
Dividend Yield
2.52%
Market Cap
$49.69 billion
Rev. per Employee
$307,785
loading...
/zigman2/quotes/200481602/composite
US : U.S.: NYSE
$ 51.63
-0.52 -1.00%
Volume: 6.58M
Jan. 20, 2021 4:00p
P/E Ratio
17.63
Dividend Yield
3.49%
Market Cap
$70.30 billion
Rev. per Employee
$246,610
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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