40 Safest Stocks: 10 Industries' Top-Rated Names
Although quantitative easing by the Federal Reserve would boost stock prices, investors are worried that the economy needs government intervention. To play it safe, here are 10 large-cap stocks that rank as analysts' favorite picks within their sectors.
Most of these stocks won't soar — but that's the point. These 10 companies are some of the largest and strongest in the U.S. The stocks are ordered by projected upside, from modest to medium.
After each synopsis are the names and tickers of three more top-rated large-cap companies in the same sector.
10. UTILITIES
Top Pick: CMS Energy is an electric and gas utility in Michigan. Second-quarter net income increased 5.1% to $82 million, but earnings per share soared 86% to 39 cents. Revenue grew 9.4% to $1.3 billion. The operating margin widened from 12% to 16%. CMS has $558 million of cash and $6.7 billion of debt, equal to a debt-to-equity ratio of 2.2.
Its stock trades at a book value multiple of 1.4, a sales multiple of 0.7 and a cash flow multiple of 3.9 — 26%, 42% and 38% discounts to utility industry averages. All 15 analysts covering CMS advise purchasing its shares.
Bullish Scenario: Oppenheimer predicts that CMS Energy's shares will rise 7% to $20.
Three More Top-Ranked Utility Stocks:
CenterPoint Energy
Public Service Enterprise Group
Sempra Energy
9. TELECOMMUNICATIONS
Top Pick: American Tower builds and manages wireless and broadcast infrastructure. Second-quarter net income surged 77% to $100 million and earnings per share gained 92% to 25 cents. Revenue grew 11%. The operating margin rose from 39% to 40%.
American Tower has $383 million of cash and $4.2 billion of debt, converting to a debt-to-equity ratio of 1.2. Its stock sells for a forward earnings multiple of 48, a book value multiple of 6 and a cash flow multiple of 22 — premiums to peer averages. Still, 80% of analysts rate it "buy."
Bullish Scenario: Citigroup expects American Tower's stock to gain 21% to $61.
Three More Top-Ranked Telecom Stocks:
CenturyLink
AT&T
Windstream
8. CONSUMER GOODS
Top Pick: Coca-Cola, the world’s largest soft drink company, sells beverages, concentrates and syrups worldwide.
Second-quarter profit increased 16% to $2.4 billion, or 88 cents a share, as revenue climbed 4.9% to $8.7 billion. The operating margin extended from 30% to 33%. Coca-Cola has $10 billion of cash and $12 billion of debt, equal to a quick ratio of 1 and a debt-to-equity ratio of 0.5.
Its stock trades at a forward earnings multiple of 16, a book value multiple of 5.4 and a sales multiple of 4.3 — on par or at slight premiums to peer averages. Roughly 88% of researchers following Coke rate its stock "buy."
Bullish Scenario: Credit Suisse values Coke's stock at $70, suggesting an 18% return.
Three More Top-Ranked Consumer Goods Stocks:
Snap-On
General Mills
Philip Morris International
7. BASIC MATERIALS
Top Pick: Peabody Energy mines for coal. Second-quarter profit more than doubled to $206 million, or 76 cents a share, as revenue increased 24% to $1.7 billion. The operating margin extended from 16% to 19%.
