These under- loved but technically superior stocks will deliver some sizable pops in very little time
The market rolls into February with investors looking for any signs that stocks will reverse their course, correcting the worst start that the S&P 500 and other major indices have ever seen.
Source: ©iStock.com/Osuleo
Many investors still are looking to get something out of the usual suspects — Apple Inc. (AAPL),Amazon.com, Inc.(AMZN) and the like. But you’re not likely to find even, consistent returns from these stocks as investors, media and analysts perform a tug-of-war over these choose few.
Our approach to finding stocks to buy is something I like to refer to as the Gretzky Approach. The Great One famously stated:
“I skate to where the puck is going to be, not to where it has been.”
We’re doing the same thing with our portfolios — buying stocks to buy based on where performance will be, not where it — or the crowd — has been. This proven approach finds performance by looking at stocks that are performing under everyone’s radar.
It’s simple: We would rather own companies that are and will be performing but aren’t already crowded (see: Apple and Amazon). Don’t worry: Wall Street will start talking about these stocks soon enough — and then the market will flood in as buyers, further amplifying our gains.
Here are 10 Gretzky-style stocks to buy that our research suggests will be up more than 10% over the next two quarters. In order of potential upside, they are …
Top 10 Stocks for 2016
Get immediate access to the names of 10 explosive stocks set to soar... no matter what happens in Washington or on Wall Street. Click here for the Buy List — yours FREE!
Get immediate access to the names of 10 explosive stocks set to soar... no matter what happens in Washington or on Wall Street. Click here for the Buy List — yours FREE!
Stocks to Buy for Double-Digit Upside: Dollar Tree, Inc. (DLTR)
Projected Upside: 10%
The retail sector struggled through another holiday season, splitting the sector into a group of “haves” and “have-nots.”
Dollar Tree (DLTR) stock has emerged as one of the “haves,” as the retailer’s shares are trading 5% higher for the year, firmly entrenched in a bullish technical trend.
Dollar Tree stock is set to move from current levels to $90 as Wall Street analysts get on board with this performer and upgrade the shares from their current 50% buy recommendations, driving prices even higher over the next three months.
Stocks to Buy for Double-Digit Upside: Dr Pepper Snapple Group Inc (DPS)
Projected Upside: 10%
Consumer staples companies are going to attract a crowd through 2016 as the rocky market puts investors in the mood to reduce volatility.
Dr. Pepper Snapple Group (DPS) stock has been the perfect embodiment of this profile for the last few years, knocking the socks off of the market with a 33% gain since January 2015.
Despite the dynamite performance, only 15% percent of the analysts tracking the stock have it ranked a Buy. Are you kidding me? DPS and its combination of growth and a decent 2% dividend will be the talk of the Street as interest rates continue to slump, helping Dr. Pepper Snapple maintain its role as one of the strongest “safety stocks” in the market.
Watch for another 10% gain over the next six months.
Stocks to Buy for Double-Digit Upside: O’Reilly Automotive Inc (ORLY)
Projected Upside: 10%
Now, with a fresh year, the fundamentals continue to support the long-term bullish outlook for O’Reilly Automotive (ORLY) stock. The charts are supportive of this outlook as O’Reilly is trading back above its 200-day trendline and other long-term bullish trendlines.
Only half of the analysts covering the stock have it ranked a buy, so we’re expecting to see this outperformer gain some upgrades to help drive O’Reilly Automotive stock to our $280 price target over the next six months.
Stocks to Buy for Double-Digit Upside: Adobe Systems Incorporated (ADBE)
Projected Upside: 10%
Mention cloud computing, and the first companies that people will talk about are Microsoft Corporation (MSFT), Alphabet (GOOG, GOOGL) and Amazon … but those in the know realize that Adobe (ADBE) has carved a great niche in the cloud area that nobody challenges.
The continued fundamental and technical strength will have analysts and Main Street investors driving cash into Adobe stock. Our models target a price of $97 over the next three months.
Stocks to Buy for Double-Digit Upside: Clorox Co (CLX)
Projected Upside: 11%
Keeping with the “Safety Stock” theme, Clorox (CLX) stock is another dividend-yielding consumer staple stock that our models favor for the next six months.
Clorox shares are trading 20% higher than their September lows, while netting a 2.4% dividend for shareholders. This defensive yielder is targeted to continue its strong trend to the $142 target over the next six months.
Stocks to Buy for Double-Digit Upside: Altria Group Inc (MO)
Projected Upside: 12%
Finally, another consumer staples stock that investors should be playing for the lower-volatility dividend appeal is Altria (MO).
Getting over the social responsibility aspect of a cigarette company, Altria stock benefits from steady demand for products, especially in slower economic times.
The 3.7% dividend yield puts Altria stock higher on the list, with 10-year Treasury yields sitting below 2%. Along with many of its peer companies, analyst buy recommendations remain low (56% buys), which is likely to change over the next six months, helping to drive prices higher.
Our current target for MO stock is $67 over the next six months.
Stocks to Buy for Double-Digit Upside: Fastenal Company (FAST)
Projected Upside: 12%
In general, industrial stocks aren’t finding their way to our bullish lists given the weakening economic data. Fastenal (FAST) is different in that its reach goes beyond industrial construction to include farms, trucks, mines, railroads, schools, etc.
In other words, Fastenal is like a consumer staples company of the industrial sector — a good thing in questionable economic times.
The lack of investor attention to this name means that we’re early to the FAST bull trend. Our current estimates have FAST trading back to $44 during the next three months.
Stocks to Buy for Double-Digit Upside: Fiserv Inc (FISV)
Projected Upside: 10%-13%
We’re an electronic payments society now — something that benefits Fiserv’s (FISV) business model. FISV’s fundamentals have been strengthening as earnings have bested analyst expectations in seven of the past eight quarters, and as Fiserv has grown revenue every quarter.
Wall Street hasn’t caught up with this trend, however, as only 29% of Wall Street analysts recommend FISV stock as a buy.
This trend will change as analysts upgrade their views, driving FISV shares to our target to the low $100s in the next three months.
Stocks to Buy for Double-Digit Upside: Mylan NV (MYL)
Projected Upside: 14%
Most investors are starting to run from the biotechnology sector, but there are a few steadfast names that still deserve attention, Mylan (MYL) being one of them.
This biotech company was one of the few that did not become a crowded trade when everyone was buying biotech blindly. This is the reason MYL remains a reasonable investment within a tumultuous sector.
Mylan stock is currently one of the few biotechnology companies trading in a bullish trend, putting the shares on our radar. At the same time, only 63% of the analysts tracking the company recommend it a buy. What we love is that Mylan stock is benefiting from continued growth in revenue and earnings per share, which will fuel even stronger technicals and (eventually) upgrades.
This standout biotech company is targeted to move to $58 over the next six months by our Behavioral Valuation models.
Stocks to Buy for Double-Digit Upside: Mattel, Inc. (MAT)
Projected Upside: 31%
Fresh off of a great earnings report, Mattel (MAT) stock is set to move to the $40 price level as investors are figuring out that they’re not just toying around (sorry for the pun).
Short sellers are on the wrong side of MAT as large short positions have built up, meaning that a covering rally will help move the stock quickly over the next week.
The latest earnings results are a trend-shifter, moving Mattel stock into an intermediate-term bullish trend worth buying.
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