Barron's came out with their annual 10 Favorite Stocks for 2013 this weekend. Last year's list outpaced the S&P by over 4% so far in 2012. I was happy to see quite a few of my core positions on the list this year. Both financial stocks, JPMorgan Chase (JPM) and Blackrock (BLK), on Barron's list among their top ten ideas for 2013 are also in my portfolio. I think both are set up for strong performances in the New Year and should be considered by value and income investors.
4 Reasons JPM still has upside from $43 a share in 2013:
- The company has beat earnings estimates each of the last three quarters and consensus earnings estimates for both FY2012 and FY2013 have risen nicely over the last three months.
- JPM yields 2.8% and should be able to raise its dividend significantly provide credit conditions and the housing market continue to improve. It has a payout ratio of just around 25%. It should also start to buy back stock now that fallout from the "whale trade" are nearly over.
- The stock is cheap at 8x forward earnings, a discount to its five year average (11.7).
- Standpoint Research recently raised its rating from "Hold" to "Buy" and Credit Suisse has an "Outperform" rating and a $50 price target on the shares.
4 Reasons BLK still has room to run from $195 a share in 2013:
- The stock has a 3.1% yield and has quintupled its dividend payout over the past seven years.
- BLK is selling near the bottom of its five year valuation range based on P/E, P/B, P/CF and P/S.
- A director bought almost $100mm in new shares in October over several transactions.
- The company has beat earnings estimates the last six quarters and consensus earnings estimates for both FY2012 and FY2013 have moved up nicely over the past two months. BLK sells at 13x forward earnings, a discount to its five year average (18.0).