The firm says these 6 stocks are their “best ideas” now.
Stocks surged for a third straight day on Thursday as investors shrugged off the Labor Department reporting 3.28 million jobless claims last week, and as cases of the coronavirus in the U.S. surpassed that of China and Italy.
The Dow gained 1,351.62 points, or 6.4%, capping off its biggest three-day surge since 1931 as it gained more than 20%. The S&P 500 jumped 6.2%, while the Nasdaq advanced 5.6% as investors cheered the Senate passing an historic $2 trillion coronavirus stimulus package.
Still, all three indexes are in bear market territory. The Dow is down nearly -24% from its record high reached last month, the S&P 500 is down -22% from its all-time high from February 19, and the Nasdaq is around -21% in the same timeframe.
But amid the market volatility, Jefferies Research identified 10 “best ideas” stocks with “strong fundamentals” and attractive valuations, that investors can buy now at prices the firm calls “practically stealing.”
Jefferies analysts selected “high-quality names that investors would want to own across a cycle – great companies that have strong business models, healthy cash flow and very robust balance sheets,” the firm’s report said.
First up was videogame publisher Activision Blizzard (NASDAQ: ATVI).
Analyst Alex Giaimo wrote in a recent note that video game makers “are less exposed to the COVID-19 issue, and possibly even stand to benefit given the stay-at-home nature of their business model.”
For Giaimo, Activision is a Buy due to its “solid visibility into the product pipeline, the company’s aggressive mobile approach,” and 100% self-owned intellectual property. The analyst says Activision will see two straight years of double-digit earnings growth and has a $72 price target on the stock, indicating nearly 25% upside from the current price.
Up next, Jefferies analyst David Katz likes Las Vegas Sands (NYSE: LVS).
Casino stocks have been hit hard amid the coronavirus pandemic as they have had to shut down to protect guests and staffs from the spread of the deadly virus, and Las Vegas Sands shares are down around -30% year-to-date.
Still, Katz says the casino operator has a strong balance sheet, stable management team, and a constantly growing share in key markets like Macau and Singapore. Even as both gambling hubs have experienced sharp declines in visitor volume due to the pandemic, Katz believes things can only go up from here for Las Vegas Sands.
Analyst Rob Dickerson likes staples stock, Mondelez (NASDAQ: MDLZ), calling it “the bellwether U.S.-based multinational food company.”
Mondelez’s iconic snack brands like Oreo, Cadbury, Sour Patch Kids, and Toblerone have been in high demand as consumers are told to hunker down at home to slow the spread of the coronavirus. Dickerson wrote that even as a severe economic decline could hurt the company’s sales, “chocolate/indulgence food categories usually do well in recessionary environments, and pantry-loading in the U.S. could help offset China pressure in the near-term.”
While Dickerson acknowledges that the company’s four production facilities in the U.S. aren’t currently operating at normal capacity, which in turn has led to shortages of some of its most in-demand products, he also pointed out that Mondelez’s team in China believes that the operating environment is on the mend, which is good news.
Overall, Dickerson is bullish on Mondelez’s long-term growth prospects and rates the stock a Buy with a $68 price target – 39% higher than the current price.
Jefferies analyst Brent Thill, however, likes Amazon (NASDAQ: AMZN), given how important the e-commerce giant has become as consumers are afraid to leave the house to shop. Thill “sees the benefit of price increases in commodity products (particularly health care) mare than offsetting any near-term inventory issues from idle factories in China.”
In the financials sector, analyst Casey Haire likes SVB Financial (NASDAQ: SIVB).
Haire noted that the Fed recently slashing its benchmark rate to zero is a negative for bank stocks as they make part of their profits from interest rates on loans. However, as the news has sent bank stocks falling, it has also offered an attractive entry point for those names with long-term value like SVB Financial.
SVB Financial focuses on funding early-stage tech companies, and Haire argues that it is well positioned to capitalize on the rebound in innovation markets once the economic damage from the COVID-19 pandemic subsides.
And on the technology front, analyst George Notter is bullish on Cisco Systems (NASDAQ: CSCO).
Cisco has “proven its resilience consistently during multiple periods of uncertainty, meltdown, contagion or crisis over the past 20 years,” Notter wrote in the report.
Notter expects recurring revenue to continue to make up a rising percentage of Cisco’s total sales as the “digital transformation of business” continues, which should push the stock higher.