Top 6 stocks to buy for June
In a somewhat overbought market, concentrate on stocks that offer unusual value.
By Sam Collins
Last week's volatility convinced many that Wednesday's high-impact key reversal day (KRD) down was the "kiss of death." But the reversal lacked follow-through, and that failure enhances the probability of further gains later this year.
This week could be crucial in determining whether institutional investors go bargain hunting or head for the exits. My guess was that bargain hunters would dominate the holiday-shortened week, and so far, that has been the case.
But I wouldn't expect too many new stock market highs in the summer months, because it appears the Fed has concluded the economy has performed well enough for them to ease back slightly on further stimulus at some time in the near future.
In a somewhat overbought market, it is important to concentrate on stocks that offer unusual value. Thus, this month's list includes stocks that, in addition to potential growth opportunities, provide dividends or special features that could enhance their value. Here are your top stocks to buy for June:
Top stock to buy #1:
Advanced Energy Industries (AEIS) provides power conversion products that transform power into various usable forms. Its products are used by semiconductor, solar panel and similar thin-film manufacturers such as flat panel display and data storage. S&P estimates earnings of $1.01 in 2013, $1.60 in 2014, and $1.82 in 2015.
The stock broke from a triple-top in December, running from $15 to a high of $20 by early March. Since then, it has been consolidating in a deep "V" formation. Accumulation has been steady, and a break above $20 could provide a target of $24. Buy AEIS at the market price.
Top stock to buy #2:
The Bank of Montreal (BMO) is the fourth largest bank in Canada and eighth largest in North America. Although earnings for fiscal year (FY) 2013, ending in October, are estimated to be flat at $6.08, FY 2014 earnings are expected to increase to $6.42, and analysts' median price target is $67. The stock has a dividend yield of 4.8%.
The stock has retreated to its major bullish support line at $60, following a channel of retreating prices that began in January. But it has held at its 200-day moving average and recently flashed a MACD buy signal.
Buy BMO at the market price in anticipation of a break from the current near-term bear channel -- and a reversal off of its bullish support line and 200-day moving average. The target for BMO is $68, which if hit, offers a possible total annual return of over 15%.
Top stock to buy #3:
Federal Realty Investment Trust (FRT) is a real estate investment trust (REIT) that owns, manages and develops shopping centers and street retail properties located in the Northeast, the Mid-Atlantic and California. At the end of 2012, it had over 2,400 leases.
Earnings have increased at a steady pace. The company earned $3.90 in 2010, $4.02 in 2011, $4.31 in 2012, and is expected to earn $4.59 in 2013 and $4.78 in 2014. The stock has a dividend yield of 2.6%, and S&P's 12-month target is $128.
The stock recently fell from a triple-top at $118, but reversed on a Collins-Bollinger Reversal (CBR) buy signal (our proprietary indicator) on May 24, at just above its breakout at $110. This pullback and reversal gives investors an opportunity to buy this quality REIT at a price that could provide a total annual return of more than 16%.
On Nov. 19, with Gilead Sciences (GILD) near $37.50, I said, "This large-cap biotech is well-positioned to gain market share." And the stock ramped up to a new high, resulting from a positive study on its Hepatitis C treatment.
Gilead then suffered two setbacks in late April, when the FDA declined to approve two HIV candidate drugs. And so, on May 1, I suggested that those who bought the stock in November may want to take profits. But recently, the European Commission approved Gilead's single-tablet regimen for the treatment of HIV-1 -- and the stock resumed its upward trend.
The stock is up 50% from our initial buy recommendation, and original buyers who did not take the suggestion to sell at just over $50 would be wise to hold the stock for further developments on the success of the new HIV tablet. Current holders of the stock could protect their gains by writing options. The trading target of $65 is the same as the median target of fundamental analysts.
Omnicom Group (OMC) is the owner of DDB, BBDO and TBWA global advertising agency networks, as well as over 100 marketing firms. The company is considered to be the bellwether of the international advertising business, with global assets that are diversified across many industries. It has a history of steady earnings, reporting $3.61 in 2012, and with estimates of $3.99 for 2013 and $4.46 for 2014.
Following a deep "V" consolidation from September 12 to February 2013, the stock broke a double-top and ran from $55 to $58. It then developed a bull channel, breaking from its top in early May. The last bar on the chart shows a CBR buy signal on very high volume. This is a powerful indication that prices are headed higher. Buy OMC at the market price with a trading objective of $73.
Pfizer (PFE) is the world's largest pharmaceutical company, producing a wide range of drugs. In October 2009 it acquired Wyeth. The blue chip has had a long history of earnings gains and dividend increases. The current dividend yield is 3.3%.
Recently, Pfizer announced plans to spin off its majority interest in animal-health company Zoetis (ZTS) to current stockholders at $100 of PFE for $107.52 of ZTS shares, subject to SEC and stockholder approval. This is viewed as a positive step that will allow the company to focus on its core business.
Technically, PFE has been in a bull market since January 2012. The current bull channel's resistance line was broken in April on high volume, but after several weeks it retreated back to its normal rate of advance. Support was recently enhanced by a CBR buy signal at $28.50 and a new MACD buy signal. The 12-month target for PFE is $35, which could provide investors with a total return of 24%.
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