After a momentous 2017 ended in a major selloff in the first month of 2018, a new economic environment had arrived. Volatility returned, interest rates are on the rise, and images of trade wars have gripped the minds of investors, factors that will serve to dampen equity gains in the near term. But for the investor willing to do their homework, there are bargains to be had, and Barron’s 2018 Mid-Year Roundtable report suggests “some companies whose stocks are too cheap to ignore”: Broadcom Inc. (AVGO), Integrated Device Technology Inc. (IDTI), BWX Technologies Inc. (BWXT), Redfin Corporation (RDFN), AutoZone Inc. (AZO), Anheuser Busch InBev ADR (BUD), Kroger Co. (KR), Phillips 66 (PSX), Noble Energy Inc. (NBL), and Arrow Electronics Inc. (ARW).
|Stock||Market Capitalization (billions USD)|
|Anheuser Busch InBev||$210.40|
|Integrated Device Technology||$4.68|
The above picks are a sample of some of the favorite names of the investment world’s top experts, of whom Barron’s interviewed for the Roundtable report. Five of those experts and their respective picks are: Paul Wick—Broadcom and Integrated Device Technology; Henry Ellenbogen—BWX Technologies and Redfin; Abbey Joseph Cohen—AutoZone and Anheuser Busch; William Priest—Kroger and Phillips 66; and Scott Black—Noble Energy and Arrow Electronics. (To read more, see: 7 Stocks That Can Lead The Market Long Term.)
Scott Black: Arrow Electronics
Arrow Electronics, the world’s largest electronics distributor, having had its stock “smashed” recently, is down 4.5% on the year making it a cheap bargain, according to Delphi Management President and Founder Scott Black. He argues that the selloff came as a result of tariff concerns but expects the company to still see 9% revenue growth this year and will generate over $200 million of free cash flow (FCF) in the coming year. At a price-to-earnings ratio that is half that of the S&P 500, Arrow is a buy for Black.
Henry Ellenbogen: BWX Technologies
With the mid-term election coming up in November, Ellenbogen believes that defense contractor BWX Technologies will be immune to which party wins since both Democrats and Republicans agree on the importance of national defense. Additionally, he claims that 80% of the company’s “business is a monopoly with good returns on capital” and that “BWX is an extremely durable company with a multiyear runway for growth,” according to Barron’s. (To read more, see: Despite Korea Talks, Defense Poised for Growth.)
Paul Wick: Integrated Device Technology
Paul Wicks likes Integrated Device Technology because he believes it has a strong positioning in the cloud-computing space and has an 80% market share in its biggest line of business, which is to supply memory buffers that are used in servers. As microprocessor companies like Intel and Advanced Micro Devices introduce new server CPUs that allow for greater memory, the average selling price for Integrated Device’s memory buffers will rise. Other parts of the business are also growing nicely and with an aggressive share-repurchase program outlined, the company’s stock price should receive a nice boost.