Jan. 8, 2020, 6:45 a.m. EST

Jefferies Adds New Stocks to Buy for 2020 to Top-Performing Franchise Picks List

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By 24/7 Wall St.

All the companies that we follow here at 24/7 Wall St. keep a list for their institutional and high net worth retail clients of high-conviction stock picks. Generally, analysts like these companies a longer-term basis, and they usually have big upside to the assigned target prices. Since the beginning of the year, many Wall Street firms have tweaked their lists to account for potential changes in 2020, and one company has added some outstanding stocks we feel could have outsized upside.

In a recent Jefferies research note, the analysts at make a big move by adding a top retail leader, an outstanding defense play and a storied electrical equipment and parts maker to the Franchise Picks family. Here we cover these new additions and also highlight two additional stocks that were added to the list recently and in December.

This company has a low 6% of foreign sales, which has helped in a strong-dollar scenario. Lowe’s Companies Inc. (NYSE: LOW) is a leading home improvement retailer with more than 2,000 stores in North America. The company has tempered its new store opening plans and is focusing investments on technology and e-commerce capabilities, in addition to improving its retail store productivity.

Lowes offers products for maintenance, repair, remodeling and home decorating. It provides home improvement products under the categories of kitchens and appliances, lumber and building materials, tools and hardware, fashion fixtures, rough plumbing and electrical, lawn and garden, seasonal living, paint, home fashions, storage and cleaning, flooring, millwork, and outdoor power equipment. The company also offers installation services through independent contractors in various product categories.

Jefferies likes the setup for this year and noted this in its report:

Investors receive a 1.84% dividend. The Jefferies price target for the stock is $143, while the Wall Street consensus target is $132.52. The stock was last seen trading at $119.63.

Everybody is familiar with the Energizer Bunny, and most investors have used the company’s battery products. Energizer Holdings Inc. (NYSE: ENR) is primarily a battery company. With a 33% global market share and its strong brand name and experienced management team, it is focused on maintaining category health and profitability, and ultimately employing its strong free-cash-flow to drive shareholder returns through dividends, share buybacks and growth-accretive mergers and acquisitions.

Last year the company acquired Spectrum Brands' battery and auto care businesses, adding the Rayovac, Armor All and STP brands to the company’s portfolio. Jefferies likes the growth potential and its report said this:

Shareholders receive a 2.43% dividend. Jefferies has a $65 price objective, and the consensus target price is $55.27. Tuesday's last trade came in at $49.48.

This recently merged company is now the sixth-largest defense outfit, as well as the third new member of the Franchise Picks list. L3Harris Technologies Inc. (NYSE: LHX) is an agile global aerospace and defense technology innovator that engages in the provision of defense and commercial technologies across air, land, sea, space and cyber domains.

The Integrated Mission Systems segment includes intelligence, surveillance and reconnaissance; advanced electro optical and infrared; and maritime power and navigation. The Space and Airborne Systems segment includes space payloads, sensors and full-mission solutions; classified intelligence and cyber defense; avionics; and electronic warfare.

The Communication Systems segment consists of tactical communications; broadband communications; L3's night vision; and public safety. The Aviation Systems segment is composed of defense aviation products; security, detection and other commercial aviation products; air traffic management; and commercial and military pilot training.

Jefferies loves the merged company and said this when adding it to the Franchise Picks list:

Investors receive a 1.42% dividend. The $250 Jefferies price target compares with a $245.24 consensus figure. The stock closed Tuesday at $212.73.

This was another recent addition to the Franchise Picks List in January. Gentex Corp. (NASDAQ: GNTX) is a leading supplier of auto-dimming mirrors to the global automotive industry, and it also manufactures rear camera displays and other visioning technology.

The company was formed in 1974 as a manufacturer of smoke detectors for the residential market, although research and development allowed it to develop proprietary technology to produce automatic dimming mirrors for the automotive market, known as electrochromic or EC mirrors, where it maintains a leading market share.

The analyst likes the setup for 2020 and beyond and noted this:

The dividend yield is 1.56%. Jefferies has set a $37 price objective. The consensus target is $26.75, but the stock was last seen trading at $29.43.

This high distribution paying C corporation structured energy play was added to the list in December. Equitrans Midstream Corp. (NYSE: ETRN) primarily engages in natural gas transmission, storage and gathering in the Appalachian Basin. The company’s only asset is its controlling 60% interest in EQM Midstream Partners.

The analysts are positive on the large payout to shareholders and noted this:

The current distribution is a massive 13.10%. The Jefferies price target is $20. The consensus target is much lower at $16, and shares closed at $13.74.

Four brand new stocks for 2020 and a December addition to the Jefferies top-performing Franchise Picks list. Note that the Franchise Picks list outperformed the S&P 500 by 3.4% in 2019, and since inception it has outperformed the index by 16%.

This blog is reprinted by permission from 24/7 Wall St, © 2007 24/7 Wall St., LLC All rights reserved.

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