At the beginning of the year I chose five stocks I thought were poised for solid upside in 2013. The stocks have performed well so far and I posit they have much more room to run. The stocks are up 10% on average for the first quarter with Citigroup, Inc. (C) performing the best, up 15.68%, and Ford Motor Co. (F) the worst, but not bad, up 2.33%.
The stocks covered in this article are buying opportunities with positive momentum and catalysts for upside in 2013. I posit each of them has robust catalysts for growth combined with notable upside going forward. Nevertheless, let's not get ahead of ourselves. Please review the following analysis of these stocks to determine if now is the right time to start a position.
In the following sections we will perform a review of the fundamental and technical state of each company as well as analyze the recent catalysts to determine if this is the right time to buy. The following table depicts summary statistics and Wednesday's performance for the stocks.
Bank of America Corporation (BAC)
BAC is up 9.57% year to date. The company is trading 1% below its 52-week high and 5% above its consensus mean target price of $12.24 for the company. BAC was trading Wednesday at $12.82, up almost 1% for the day.
Fundamentally, BAC has several positives. The company has a forward P/E of 9.70. BAC has a net profit margin of 5.03%. BAC is trading for approximately 58% of book value. Insider ownership is up by 33% over the last six months. EPS next year is expected to rise by 30% and the company pays a dividend with a yield of .33%.
Technically, BAC is in a solid uptrend and just broke out above the current trading range. The coveted golden cross was fulfilled earlier this year. The stock has been in a solid uptrend since mid-July. The stock is currently trading above all three major support levels. The stock is technically solid here.
Although BAC did not increase the dividend after passing the Fed's stress test, they blew the Street estimates away by announcing a mammoth $10.5 billion share repurchase program. This has propelled the stock to new 52-week highs. Nevertheless, the stock has much more room to run. The stock is still trading at a 40% discount to book value. With the housing market continuing to improve, I see significant upside in the stock going forward.
Citigroup is up 15.78% year to date. The company is trading 4% below its 52-week high and has 8% upside potential based on the analysts' mean target price of $50.07 for the company. Citigroup was trading Wednesday for $46.15, up 1% for the day.
Fundamentally, Citigroup has several positives. The company has a forward P/E of 8.77. Citigroup is trading for 73% of book value. The company has a PEG ratio of 1.44 and a net profit margin of 11.27%.
Technically, the stock looks solid. The golden cross was achieved at the beginning of October and the stock never looked back. Recently the stock has pulled back somewhat. The stock is a buy here.
Citigroup should benefit greatly from an upturn in global growth and the US housing market. The company aced the Fed's stress test. Citigroup looks poised for solid earnings growth in 2013.
Cisco Systems, Inc. (CSCO)
Cisco is up 9.52% year to date. The company is trading 1% below its 52-week high and has 8% potential upside based on the consensus mean target price of $23.44 for the company. Cisco was trading Wednesday at $21.68, up nearly 1% for the day.
Fundamentally, CSCO looks solid. Cisco has a forward P/E of 10.20. Cisco's quarter-over-quarter EPS and sales growth rates are 46% and 5%, respectively. Cisco's net profit margin has increased to 19.72%. Cisco has a dividend with a yield of 2.60%. The company is trading at 13 times free cash flow.
Technically, Cisco has been performing well. The coveted golden cross has been achieved. The stock is currently consolidating at the 50-day sma.
The proliferation of smartphones and other mobile devices should be a major profit driver for the company. Cisco predicts mobile data traffic will post a 66% CAGR from 2012 to 2017. Cisco is a long-term buy here.
Ford Motor Co.
Ford is up 2.33% year to date. The company is trading 6% below its 52-week high and has 14% upside based on the analysts' mean target price of $15.14 for the company. Ford was trading Wednesday for $13.35, up over 1% for the day.
Fundamentally, Ford has several positives. The company has a forward P/E of 7.88. Ford is trading for 18 times free cash flow and approximately 3 times book value. EPS next year is expected to rise by approximately 20%. The company pays a dividend with a yield of 3.04% and has a PEG ratio of 0.88 and a net profit margin of 13.36%.
Technically, Ford is currently in a well-defined uptrend. The stock has been in a solid uptrend since the last quarter. The stock achieved the coveted golden cross where the 50-day sma crosses above the 200-day sma. The stock just successfully tested support at the bottom of the uptrend channel.
Ford's issues are in Europe. Nevertheless, they have been working on right sizing European operations for the last few quarters. The probabilities of a rebound in the US housing market coupled with the fact that cars on the road are about 11 years should provide a significant catalyst for the stock. In my last missive regarding the stock I stated to wait for confirmation of support. This has occurred. I like the stock here.
General Electric Company (GE)
GE is up 12.01% year to date. The company is trading 2% below its 52-week high and has 7% potential upside based on the consensus mean target price of $25.07 for the company. GE was trading Wednesday at $23.39, up slightly for the day.
Fundamentally, GE looks undervalued. GE's forward P/E is 12.61. GE's quarter-over-quarter EPS and sales growth rates are 10% and 4%, respectively. GE's net profit margin is 10.11%. GE has a dividend with a yield of 3.26%.
Technically, GE has been in an uptrend since bouncing off a low of $18 in June. Recently, the stock has broken out to the upside after testing the 200-day sma twice in the last quarter. Currently the stock is consolidating just above the 20-day sma.
GE looks poised to take advantage of an upturn in growth in the emerging markets. GE raised its authorized stock buyback to $35 billion and plans to buy back $10 billion worth of shares in 2013. I like the stock here, yet would definitely layer into any position.
The Bottom Line
I posit these stocks present excellent buying opportunities. Nonetheless, markets incessantly gyrate, the only constant is the fact that they always go up over the long haul. Look to buy on dips. These are long-term investments. The risk reward ratio for a long position in these stocks is currently favorable. 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 always have a well-balanced diversified portfolio. Furthermore, this is only a starting point for your own due diligence. Never forget, you need to determine for yourself if these dogs can hunt.
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 is 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.