With the market trading at all-time highs, it's harder to find bargains. But some companies are still trading at much lower valuations than the overall market. They also have great economic moats. Here are the Top 10 Stocks for 2015:
1. Bank of America (NYSE:BAC)
Bank of America is currently trading at yearly highs of around $18.00. Earnings are expected to be around $1.47 per share in 2015. With legal issues behind them, management plans to request an increase in the dividend and continue to buy back stock. The stock currently yields 1.1%, but analysts expect the dividend payment to double in the next few years. Also, if interest rates rise in 2015, management believes that each percentage point brings in $3 billion in pre-tax profits. Additionally, Bank of America's stock is still trading below its book value of around $21.50. Expect shares to rise in 2015.
2. Citigroup (NYSE:C)
Like, Bank of America, Citigroup's stock has been slammed in recent years because of the financial crisis. Most of Citigroup's legal issues have been resolved or will be resolved in Q4 2014. The company has also been shedding risky international businesses to improve risk forecast and streamline their business, steps that will make the Federal Reserve happy and confident in the bank. Citigroup has the lowest book-to-price ratio among large cap banks of 0.81. Its book value is around $67.00.
The stock is currently trading around $54.50 and has lagged the overall market with a year-to-date return of only 4.5% compared to S&P's return of over 13%. Also, after 2014′s dividend increase rejection by the Federal Reserve, the company has made several changes requested by the Federal Reserve that will increase the chances of an approval of a dividend increase in 2015. With all these positives, expect Citigroup shares to play catchup in 2015 which could take the stock to $65.00
3. American International Group (NYSE:AIG)
AIG is one of the largest global insurance companies in over 100 countries. Management have streamlined their operations after the financial crisis and now is solely into the insurance business. AIG is currently trading around $56.50, up about 10% percent this year. When interest rates increase next year, AIG will be able to make more money on its investments, boosting profitability. Management plans on continuing to buy back stock and gradually increasing its dividend. AIG will eventually trade around book value of around $77. Expect shares to rise at least 5% to 10% in 2015.
4. General Motors (NYSE:GM)
General Motors has had a bad year in the press and court room. The company has been dealing with massive recalls of vehicles with faulty ignition switches. This has cost General Motors billions in repairs and compensation to victims. Shares are down 17.5% in 2014, trading at around $33.70. The company is financially very stable with large cash stockpiles and manageable debt. The stock has a very attractive dividend of 3.5%.
With China sales increasing, and U.S. continuing to boom, expect profitability to increase in 2015. The lower gas prices may also increase sales of its high margin SUVs. Shares could return 10% to 20% in 2015.
5. Huntsman Corporation (NYSE:HUN)
Huntsman is a mid-cap chemical company out of Salt Lake City, Utah. The company's products consist a range of chemicals and formulations, which it markets globally to a range of consumer and industrial customers. The stock is around $23.60, down about 4% this year. Investors are bearish on the company because of weak global pigment demand. The company plans plant closures in Europe and job cuts at some of their manufacturing facilities. These moves will save the company millions of dollars in the coming years.
Huntsman pays a healthy dividend of 2% and trades at 8.8 times 2015 earnings. The company expects earnings of around $2.4 in 2015. If the company trades at a P/E of 14 like its peers, the stock could trade at around $34.00 by the end of 2015.
6. Valero Energy (NYSE:VLO)
Valero Energy is the largest independent refiner in the United States. Valero's refineries can produce conventional gasoline, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products. Large crude oil price drops like the recent one don't directly affect refiners. The WTI and Brent spread is the one to watch for refiners. The spread currently is between $4-$5. Valero continues to benefit from the wide spread, as most refined petroleum products are priced using the Brent price and not the lower WTI price that Valero gets its crude oil it has to process at.
The company currently pays a healthy dividend that yields 2.4%, and is buying back stock. The export market for refined products remains strong, and the company is adding more processing capacity that will boost output in 2015. Analysts expect Valero to earn $5.5 per share in 2015. Expect the shares to trade in $60s in 2015.
7. Sanderson Farms (NASDAQ:SAFM)
Sanderson Farms, Inc. is a fully integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Sanderson Farms is a very unique company that believes in 100% natural chicken - there are no additives, artificial ingredients or preservatives. Some companies add a solution to their fresh chicken products that can include water, salt, carrageenan (a seaweed extract), broth or phosphates. With the world growing more health conscious, they will look to more natural and chemical free food such as the food Sanderson Farms produces.
In the most recent quarterly report, Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms, said the company reported record annual sales of $760.9 million for the year that were a 3.4 percent increase over fiscal 2013. Also, the company is adding a poultry farm in Texas in 2015.
The company has very low debt and high cash balances. Analysts expect Sanderson Farms to earn at least $8 per share in 2015. Also, there are chances that the company with pay another special dividend in 2015. Shares could trade over $100 by the end of 2015.
8. MetLife (NYSE:MET)
MetLife is the largest life insurance provider in the United States. The company provides life insurance, annuities, employee benefits and asset management. Just recently, MetLife was labeled a systemically important financial institution by a council of regulators.
"We continue to believe that MetLife is not systemically important," MetLife said in the statement. "The company will carefully review the designation rationale as it considers its next steps." A lawsuit may take a year to settle. In the mean time, the company will continue to do well. It pays a healthy dividend of 2.5%. The stock is a laggard this year, up only 2% at around $55. MetLife will benefit from likely higher interest next year. Analysts expect MetLife to earn $5.5 per share in 2015. The stock may catch up to its book value of $63 in 2015.
9. Pilgrim's Pride (NYSE:PPC)
Pilgrim's Pride is engaged in the production, processing, marketing and distribution of fresh, frozen and value-added chicken products to retailers, distributors and food service operators. The company has operations in the United States, Mexico and Puerto Rico. Pilgrim's Pride is the second largest poultry producer in the United States, behind Tyson Foods. Feedstock prices remain low and the company is growing into new markets. Pilgrim's operating margins are much higher than its peers. The stock trades at a lower valuation of just 11 times 2015 earnings. Although the stock is up over 100% this year, based on valuation, the stock has more room to increase. Expect the stock to trade in the $40s in 2015.
10. Capital One Financial (NYSE:COF)
Capital One Financial is a diversified financial services holding company with banking and non-banking subsidiaries. The company operates in three segments: Credit Card, Consumer Banking, and Commercial Banking. The company will benefit from the growing U.S. economy and job growth expansion. The stock is up over 8% this year at around $83, but is still trading at very low valuations of around 11 times 2015 earnings. The company will most likely increase its currently low dividend of 1.4% in 2015. Shares could trade in the $100s by the end of 2015.
Disclosure: The author is long BAC, C, AIG, VLO