All of the stocks covered have solid secular growth stories in my book. I posit each of them has robust catalysts for growth combined with notable upside going forward. Moreover, these stocks will be underpinned by renewed global growth.
With China currently emerging out of a funk, Europe bottoming and positive economic indicators out of the U.S., these stocks should benefit greatly. Furthermore, a turnaround in the U.S. housing market coupled with the never-ending Fed QE program should support equity markets in general.
In the following sections, we will perform a review of the fundamental and technical state of each company to determine if this is the right time to buy. What's more, we will attempt to identify the potential catalysts for growth. The following table depicts summary statistics and Thursday's performance for the stocks.
Citigroup, Inc. (C)
The company is trading 1% below its 52-week high and has 11% upside potential based on the analysts' mean target price of $47.75 for the company. Citigroup was trading Thursday for $42.87, down slightly for the day.
Fundamentally, Citigroup has several positives. The company has a forward P/E of 8.29. Citigroup is trading for 69% of book value. The company has a PEG ratio of 1.48 and a net profit margin of 11.27%. EPS is up 36% quarter-over-quarter.
Technically, the stock looks solid. The golden cross was recently achieved at the beginning of October. Since, the stock is up over 30%. The uptrend has been slow and steady.
Global money center banks like Citigroup are the source of funding for global growth. The uptick in the housing market and the steepening of the yield curve due to demand for long-term capital are strong buy indicators for the banks.
Citigroup has a fortress balance sheet. Citigroup's success at cutting costs, improved capital position and the likelihood of higher capital returns are all huge positives going forward. The stock is a solid buy at this level.
Cisco Systems, Inc. (CSCO)
The company is trading 1% below its 52-week high and has 5% potential upside based on the consensus mean target price of $22 for the company. Cisco was trading Thursday at $21.10, down slightly for the day.
Fundamentally, CSCO looks solid. Cisco has a forward P/E of 10.09. Cisco's quarter-over-quarter EPS and sales growth rates are 20% and 6%, respectively. Cisco's net profit margin is 17.90%. Cisco has a dividend with a yield of 2.64%. The company is trading at 13 times free cash flow.
Technically, Cisco has been performing well since bouncing off a low of 15 in late July. The stock has posted higher highs and higher lows since that time. The coveted golden cross has been achieved. The stock is in a solid uptrend.
Cisco is trading at a low price-to-earnings multiple even when taking into account lower earnings expectations. Furthermore, the stock is trading several multiples below the long-term norm.
The proliferation of smartphones and other mobile devices should be a major profit driver for the company. I posit the need for network improvements as the growth of people transacting on their mobile devices will soon reach a tipping point and Cisco will be there to provide solutions. The average mobile user used 201 mega bytes of data per month in 2012, more than twice the 92 mega bytes per month consumed in 2011, according to this year's update to Cisco's Visual Networking Index. Cisco predicts mobile data traffic will post a 66% CAGR from 2012 to 2017. Cisco is a long-term buy here.
Facebook Inc. (FB)
Facebook is trading 36% below its 52-week high and has 19% potential upside based on a consensus mean target price of $34.15 for the company. Facebook was trading Thursday for $28.65, down nearly 2% for the day.
Facebook's fundamentals are mixed. The company has a forward PE of 36. EPS for the next five years is expected to rise by 30%. Sales are up quarter-over-quarter and the company has a net profit margin of 1%.
Technically, Facebook looks solid. The stock has achieved the coveted golden cross. It has recently pulled back the 50-day sma, which is an opportune time to start a position.
The new attitude of Facebook's management impressed me. Also, mobile revenues were up substantially last quarter and the new revenue stream created by introducing the gift program for friends intrigues me. This is a change in stance from me regarding the stock. I like the stock here.
Halliburton Company (HAL)
The company is trading 1% below its 52-week high and has 16% upside potential based on the consensus mean target price of $47.41 for the company. Halliburton was trading Thursday for $40.83, up over 1% for the day.
Fundamentally, Halliburton has some positives. The company has a forward P/E of 10.31. Halliburton pays a dividend with an yield of nearly 1%. Halliburton's expected EPS growth rate for next five years is 15%. The current net profit margin is 9%. Halliburton's PEG ratio is 1.
Technically, Halliburton has been on fire since June. The company gapped up after beating earnings.
Halliburton's profit streams are stable. The company is one of the oldest and most trusted oil service companies in the business. HAL practically invented fracking. With the proliferation of new unconventional shale plays being found around the world, you can bet your bottom dollar HAL will be extremely busy for the next several years. Even so, I would wait for the stock to cool down some prior to starting a position.
Annaly Capital Management, Inc. (NLY)
Annaly is trading 12% below its 52-week high and has 4% upside based on the consensus mean target price of $15.24 for the company. Annaly was trading Thursday for $14.66, down almost 2% for the day.
Fundamentally, Annaly has several positives. The company has a forward P/E of 9.91. Annaly is trading for four times free cash flow and a 16% discount to book value. The company pays a dividend with a yield of 12.28% and has a net profit margin of 44%. EPS is up over 100% quarter-over-quarter.
Technically, Annaly looks like it is turning the corner. The stock has posted higher highs and higher lows since taking a precipitous drop in November. The 50-day sma is trending upward at this point.
Annaly's judicious management of asset choice, liability management and business growth has produced substantial returns for investors. The majority of returns come from dividend income. Since its IPO in 1997, Annaly has paid out over $8 billion in dividends to shareholders. The U.S. Housing market is on the comeback trail and Annaly is a buy here.
The Bottom Line
I posit these stocks present excellent buying opportunities. The potential is great for them to rise significantly from current levels as the markets gain their footing. Markets incessantly gyrate, the only constant is the fact that they always go up over the long haul.
These are long-term investments. If you try to trade the market during these volatile times, you will most certainly get crushed. The risk-reward ratio for a long position in these stocks is currently favorable. Nevertheless, wait for a pullback to start a position in HAL. There will be more volatility in the market going forward though. Remember, we are sitting at five-year highs.
If you choose to start a position in any stock, I suggest layering in a quarter at a time at a minimum to reduce risk and setting a 5% trailing stop loss to minimize losses even further if you wish.
Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.