What stocks are hot, and how does your portfolio measure up? You can find out exactly with the TipRanks-powered Smart Portfolio tools at Nasdaq, and compare your stock choices to an “ideal,” or best-performing investment portfolio. Smart Portfolio gives you tools to plan your strategy, track your investments, and analyze the results.
We’ve dipped into the Smart Portfolio data on close to 200,000 portfolios, to take a look at the best performing investments, and the three most popular components of high-performing investment portfolios may surprise you. We’ll take a look at them; there is one each from the Consumer Goods, Services, and Technology sectors. To cut through the suspense, you can see here their percentage of the total portfolio:
Now let’s take a closer look at why these three stocks are such popular picks right now:
This Apple Doesn’t Fall?
Apple, Inc. (AAPL – Research Report), listed under the Consumer Goods category, makes up the single largest share, at 12.77%, of the best performing Nasdaq portfolio – and it’s no wonder why. Even after taking heavy share-value losses in the last quarter of 2018, Apple remains the world’s second-most valuable publicly traded company. And with share prices up 8% year-to-date, Apple is back to showing clear returns.
The turnaround came right after New Year’s, when CEO Tim Cook revised the company’s Q4 guidance downward, in light of declining iPhone sales and four weeks in advance of release. The strategy worked; Apple shares took a hit, but near the bottom of their recent valuation, and the buzz got investors and analysts talking about the company’s prospects. By the time the official Q4 numbers were released – and slightly better than the revised guidance had indicated – market watchers had already convinced themselves that Apple remains a good buy and had put it back on an upward trend.
Five-star analyst Timothy Arcuri (Track Record & Ratings), of UBS, clearly states the bull case for Apple. He lays out four reasons for optimism on the stock:
“1) We are now through the worst of the bad news for a while;
2) AAPL is getting a paltry ~$30MM/Q from its largest 3rd party subscription app which shows the vast fertile ground;
3) iPhone replacement cycles continue to elongate but AAPL’s numbers suggest they could now be close to some asymptote;
4) new proprietary content (video) and aggregation services (gaming) this year should spur a pivot in the narrative.”
Arcuri takes a more optimistic stance on Apple than most investors, but he backs up his outlook by setting a high price target: $185. His new target suggests an 8% upside to the stock.
Writing from Wedbush, Daniel Ives (Track Record & Ratings) shares the positive outlooks, and for similar reasons. He says, “While the overall headline numbers were not a surprise, Apple's March guidance was better than feared.” His price target, $200, gives a 17% upside for AAPL shares.
On average, Apple holds a ‘Moderate Buy’ consensus rating, based on 17 ‘buys’ and 19 ‘holds.’ The average price target is $176, for a 3% upside compared to the current share price of $170.
The Giant in the Industry
It shouldn’t surprise anyone to hear that Amazon.com, Inc. (AMZN – Research Report), with a 12.16% share, represents the Services sector stocks in our “dream” portfolio. The 800-pound gorilla of online retail dominates its industry, and over the last decade has been changing the way that people shop.
The changes, however, have affected Amazon, too. The company has seen a slowdown in its core ecommerce revenues, which has impacted the bottom line. At the same, as William Blair analyst Dylan Carden (Track Record & Ratings), took care to point out, Amazon is now reaping the benefits of previous years’ business investments. Referring to Amazon’s expansion of services, Carden says, “higher-margin services businesses including AWS, advertising, and fulfillment, continue to make up more [of] the model, and can drive significant profitability gains moving past a more recent period of higher investment spending.”
Carden sets a bullish price target on Amazon, befitting his view of the company’s forward profitability, of $2115. This implies a 29% upside from the stock’s current trading levels.
A concurring opinion comes from Michael Graham (Track Record & Ratings) at Canaccord. He notes Amazon’s slower rate of revenue growth, but that does not deter him from the stock. He describes the still-robust 20% as a “new normal” moving ahead and sees a potential 37% upside on the investment. Graham sets ‘Buy’ rating with a highly aggressive $2,250 price target for AMZN.
Amazon stands at $1640 as markets open today (February 14), and the average share price of $2121 gives the shares a 29% upside – matching Carden’s target. The analyst consensus on this stock is a ‘Strong Buy,’ based on a total of 36 ‘buy’ ratings and 1 lonely ‘hold.’
A Surprising Tech Entry
When you think about the tech sector, you don’t normally think about the phone company. But phones are tech, and AT&T (T – Research Report) is still the largest provider of landline phone service in the United States. It is also the US’ second-largest provider of mobile services, and the world’s largest telecom company. AT&T also makes up over 5% of the best performing portfolio; let’s look at why.
AT&T has also proven to be a remarkably strong investment over the long run. The company is a true dividend champion, yielding 6.8% currently, and holding a 34-year record of dividend payout growth. AT&T covers this whopping percentage with its free cash flow – mobile and content subscriptions are cash-cow businesses, and AT&T has made good use of them.
The dividend, and the general stability of T shares, caught the attention of five-star financial blogger Keith Noonan (Track Record & Ratings). Writing of AT&T, Noonan asks why T should make the short list of investments, given its history of low cost and slow appreciation. The near-7% dividend figured heavily in his answer: “The stock's massive yield and forward price-to-earnings multiple of less than 8.5 are obvious reasons, and the company's 34-year streak of delivering annual payout increases evidences commitment to increasing cash returned to shareholders.”
To put a number on that conservative outlook, we can turn to Oppenheimer analyst Timothy Horan (Track Record & Ratings). Breaking down the numbers, Horan sees gains in EBITDA and EPS, and potential for further revenue growth in the video subscription service as it “…works through the very low-priced promotions.” Horan take on the business fundamentals leads him to a high price target for T shares: $41, a 37% upside potential.
Based on the consensus, the market’s top analysts appear to agree with Noonan. T holds a ‘Strong Buy’ rating, based on 11 ‘buys’ and 3 ‘holds, with a $34 price target giving a 17% upside. The stock currently trades at $29, making the cost of entry remarkably affordable for one of the highest-yielding stocks readily available.
Author: Michael Marcus