Philip van Doorn

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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 +3.70%  of Toronto, with a closing price in Canadian dollars as of July 3, and BASF SE /zigman2/quotes/204280060/delayed DE:BAS +1.14%  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
$ 36.35
-0.38 -1.03%
Volume: 604,761
July 6, 2022 4:00p
P/E Ratio
5.65
Dividend Yield
1.60%
Market Cap
$2.66 billion
Rev. per Employee
$3.52M
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/zigman2/quotes/209694942/delayed
CA : Canada: Toronto
$ 24.10
+0.86 +3.70%
Volume: 5.48M
July 6, 2022 4:22p
P/E Ratio
12.32
Dividend Yield
0.04%
Market Cap
$16.08 billion
Rev. per Employee
N/A
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/zigman2/quotes/200215692/composite
US : U.S.: NYSE
$ 27.38
+0.12 +0.44%
Volume: 35.58M
July 6, 2022 4:03p
P/E Ratio
7.94
Dividend Yield
2.19%
Market Cap
$39.51 billion
Rev. per Employee
$974,777
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/zigman2/quotes/202684633/composite
US : U.S.: NYSE
$ 27.79
+0.25 +0.91%
Volume: 2.69M
July 6, 2022 4:00p
P/E Ratio
5.14
Dividend Yield
3.06%
Market Cap
$5.78 billion
Rev. per Employee
$1.00M
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/zigman2/quotes/202113551/composite
US : U.S.: NYSE
$ 76.76
-0.77 -0.99%
Volume: 815,120
July 6, 2022 4:00p
P/E Ratio
7.25
Dividend Yield
1.82%
Market Cap
$7.53 billion
Rev. per Employee
$446,450
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/zigman2/quotes/201668256/composite
US : U.S.: NYSE
$ 177.28
-0.80 -0.45%
Volume: 206,439
July 6, 2022 4:00p
P/E Ratio
15.49
Dividend Yield
N/A
Market Cap
$5.84 billion
Rev. per Employee
$300,809
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/zigman2/quotes/207605056/composite
US : U.S.: NYSE
$ 83.34
-1.30 -1.54%
Volume: 12.13M
July 6, 2022 4:00p
P/E Ratio
8.57
Dividend Yield
2.21%
Market Cap
$109.48 billion
Rev. per Employee
$5.47M
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/zigman2/quotes/204280060/delayed
DE : Germany: Frankfurt
40.50
+0.46 +1.14%
Volume: 1,540
July 7, 2022 9:35a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€512,034
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/zigman2/quotes/209758976/composite
US : U.S.: NYSE
$ 62.27
-0.80 -1.27%
Volume: 1.75M
July 6, 2022 4:03p
P/E Ratio
8.44
Dividend Yield
3.66%
Market Cap
$23.15 billion
Rev. per Employee
$291,357
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/zigman2/quotes/209694942/delayed
CA : Canada: Toronto
$ 24.10
+0.86 +3.70%
Volume: 5.48M
July 6, 2022 4:22p
P/E Ratio
12.32
Dividend Yield
0.04%
Market Cap
$16.08 billion
Rev. per Employee
N/A
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/zigman2/quotes/204280060/delayed
DE : Germany: Frankfurt
40.50
+0.46 +1.14%
Volume: 1,540
July 7, 2022 9:35a
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
$ 174.68
+2.11 +1.22%
Volume: 481,278
July 6, 2022 4:00p
P/E Ratio
23.70
Dividend Yield
1.56%
Market Cap
$9.33 billion
Rev. per Employee
$656,340
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/zigman2/quotes/201997607/composite
US : U.S.: NYSE
$ 239.60
+8.64 +3.74%
Volume: 1.05M
July 6, 2022 4:00p
P/E Ratio
25.79
Dividend Yield
1.87%
Market Cap
$44.55 billion
Rev. per Employee
$369,149
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/zigman2/quotes/203825795/composite
US : U.S.: NYSE
$ 44.46
-0.06 -0.13%
Volume: 9.09M
July 6, 2022 4:03p
P/E Ratio
6.29
Dividend Yield
1.35%
Market Cap
$16.12 billion
Rev. per Employee
$1.12M
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/zigman2/quotes/207281914/composite
US : U.S.: NYSE
$ 65.39
+0.37 +0.57%
Volume: 1.61M
July 6, 2022 4:04p
P/E Ratio
8.99
Dividend Yield
2.36%
Market Cap
$21.38 billion
Rev. per Employee
$1.24M
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/zigman2/quotes/200327741/composite
US : U.S.: NYSE
$ 29.53
-0.29 -0.97%
Volume: 10.29M
July 6, 2022 4:00p
P/E Ratio
37.37
Dividend Yield
0.00%
Market Cap
$19.12 billion
Rev. per Employee
$422,868
loading...
/zigman2/quotes/205272400/composite
US : U.S.: NYSE
$ 46.78
-0.19 -0.40%
Volume: 1.40M
July 6, 2022 4:00p
P/E Ratio
6.84
Dividend Yield
3.85%
Market Cap
$8.08 billion
Rev. per Employee
$1.78M
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/zigman2/quotes/207741460/composite
US : U.S.: NYSE
$ 46.15
-0.46 -0.99%
Volume: 14.95M
July 6, 2022 4:04p
P/E Ratio
5.44
Dividend Yield
4.42%
Market Cap
$90.51 billion
Rev. per Employee
$357,498
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/zigman2/quotes/204480509/composite
US : U.S.: NYSE
$ 106.04
-0.62 -0.58%
Volume: 1.58M
July 6, 2022 4:00p
P/E Ratio
4.17
Dividend Yield
2.26%
Market Cap
$41.92 billion
Rev. per Employee
$652,215
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/zigman2/quotes/205518355/composite
US : U.S.: NYSE
$ 481.87
+17.51 +3.77%
Volume: 899,663
July 6, 2022 4:00p
P/E Ratio
13.33
Dividend Yield
1.44%
Market Cap
$72.18 billion
Rev. per Employee
$401,216
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/zigman2/quotes/203237915/composite
US : U.S.: NYSE
$ 93.92
+1.00 +1.08%
Volume: 4.29M
July 6, 2022 4:00p
P/E Ratio
33.69
Dividend Yield
2.34%
Market Cap
$138.19 billion
Rev. per Employee
$372,638
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/zigman2/quotes/205410375/composite
US : U.S.: NYSE
$ 35.56
-0.32 -0.89%
Volume: 4.33M
July 6, 2022 4:00p
P/E Ratio
7.54
Dividend Yield
4.39%
Market Cap
$17.78 billion
Rev. per Employee
$392,888
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/zigman2/quotes/208495069/composite
US : U.S.: NYSE
$ 61.57
-0.46 -0.74%
Volume: 4.89M
July 6, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
0.52%
Market Cap
$68.27 billion
Rev. per Employee
$442,143
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/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 36.31
-0.20 -0.55%
Volume: 5.00M
July 6, 2022 4:00p
P/E Ratio
38.47
Dividend Yield
0.00%
Market Cap
$21.65 billion
Rev. per Employee
$334,519
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/zigman2/quotes/200894270/composite
US : U.S.: NYSE
$ 30.98
-0.26 -0.83%
Volume: 35.93M
July 6, 2022 4:00p
P/E Ratio
8.83
Dividend Yield
2.71%
Market Cap
$251.70 billion
Rev. per Employee
$465,510
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/zigman2/quotes/206319319/composite
US : U.S.: NYSE
$ 61.93
-0.41 -0.66%
Volume: 3.82M
July 6, 2022 4:00p
P/E Ratio
8.03
Dividend Yield
3.23%
Market Cap
$50.70 billion
Rev. per Employee
$1.66M
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/zigman2/quotes/200691238/composite
US : U.S.: NYSE
$ 425.89
+10.64 +2.56%
Volume: 1.04M
July 6, 2022 4:03p
P/E Ratio
18.81
Dividend Yield
2.63%
Market Cap
$110.50 billion
Rev. per Employee
$576,754
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/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 33.28
-0.42 -1.25%
Volume: 3.82M
July 6, 2022 4:00p
P/E Ratio
9.56
Dividend Yield
3.61%
Market Cap
$23.12 billion
Rev. per Employee
$440,142
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/zigman2/quotes/200972303/composite
US : U.S.: NYSE
$ 41.07
-0.47 -1.13%
Volume: 1.17M
July 6, 2022 4:00p
P/E Ratio
11.21
Dividend Yield
0.00%
Market Cap
$5.24 billion
Rev. per Employee
$309,202
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/zigman2/quotes/205356474/composite
US : U.S.: NYSE
$ 59.45
-0.26 -0.44%
Volume: 7.43M
July 6, 2022 4:00p
P/E Ratio
45.05
Dividend Yield
3.70%
Market Cap
$47.39 billion
Rev. per Employee
$395,065
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/zigman2/quotes/200481602/composite
US : U.S.: NYSE
$ 47.65
-0.99 -2.04%
Volume: 8.80M
July 6, 2022 4:00p
P/E Ratio
10.64
Dividend Yield
4.03%
Market Cap
$64.76 billion
Rev. per Employee
$433,768
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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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